Graph 5-2
-Refer to Graph 5-2.If there is a four per cent decrease in the price of a good and this leads to a 12 per cent increase in the quantity demanded then the price elasticity is:
A)3 and elastic
B)3 and inelastic
C)0.3 and elastic
D)0.3 and inelastic

Question

Graph 5-2  
-Refer to Graph 5-2.If there is a four per cent decrease in the price of a good and this leads to a 12 per cent increase in the quantity demanded then the price elasticity is:
A)3 and elastic 
B)3 and inelastic 
C)0.3 and elastic 
D)0.3 and inelastic

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, it is (12% / 4%) = 3, indicating that the demand is elastic (since the elasticity is greater than 1).