If the price elasticity of demand for Harley-Davidson motorcycles is -1.2 and quantity demanded increases by 24%, price must have
A) decreased by 20%.
B) increased by 20%.
C) decreased by 28.8%.
D) decreased by 0.05%.

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Given the elasticity of -1.2 and a 24% increase in quantity demanded, the price must have decreased by 20% (24% / 1.2 = 20%).

If the Price Elasticity of Demand for Harley-Davidson Motorcycles Is