If the price elasticity of demand for a good is 1.2,then a 3 percent decrease in price results in a
A)0.4 percent increase in the quantity demanded.
B)2.5 percent increase in the quantity demanded.
C)3.6 percent increase in the quantity demanded.
D)6 percent increase in the quantity demanded.

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. With an elasticity of 1.2, a 3% decrease in price results in a 3% * 1.2 = 3.6% increase in quantity demanded.

If the Price Elasticity of Demand for a Good Is