Suppose we find that the price elasticity of demand for a product is 1.25 when its price is increased by 8 percent. We can conclude that quantity demanded
A)increased by 0.16 percent.
B)decreased by 10 percent.
C)decreased by 0.8 percent.
D)decreased by 0.16 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. If the elasticity is 1.25 and the price increases by 8 percent, the quantity demanded decreases by 1.25 times 8 percent, which equals 10 percent.

Suppose We Find That the Price Elasticity of Demand for a Product