If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a
A)0.50 percent decrease in the quantity demanded.
B)2.00 percent decrease in the quantity demanded.
C)50.00 percent decrease in the quantity demanded.
D)100.00 percent decrease 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 5, a 10 percent increase in price leads to a 50 percent (5 * 10%) decrease in quantity demanded.

If the Price Elasticity of Demand for a Good Is