If the price elasticity of demand for leisure air travel is −1.60 a _____ percent decrease in its price will cause a _____ in the amount of leisure air travel demanded.
A) 10; 16 percent decrease
B) 10; 16 percent increase
C) 16; 10 percent increase
D) 16; 10 percent decrease

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is percentage change in quantity demanded divided by percentage change in price. With an elasticity of -1.60, a 10% decrease in price leads to a 16% increase in quantity demanded (10 * -1.60 = -16, indicating a 16% increase due to the negative sign indicating inverse relationship).

If the Price Elasticity of Demand for Leisure Air Travel