If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then demand is:
A) elastic.
B) inelastic.
C) of unitary elasticity.
D) 0.
E) inferior.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the percentage change in quantity demanded is -20% and the percentage change in price is 100%, resulting in an elasticity of -0.2, which indicates inelastic demand.

If an Increase in the Price of a Product from $1