If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then
A)demand is price elastic.
B)demand is price inelastic.
C)demand is unit elastic with respect to price.
D)not enough information is given to make a statement about elasticity.

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. Here, the quantity demanded increases by 25% ([125-100]/100), and the price decreases by 10% ([9-10]/10). Since the percentage change in quantity demanded is greater than the percentage change in price, demand is price elastic.

If the Price of Hand Calculators Falls from $10 to $9