If the price elasticity of demand for a good is 1.5,then a 3 percent decrease in price results in a
A) 0.5 percent increase in the quantity demanded.
B) 2 percent increase in the quantity demanded.
C) 4.5 percent increase in the quantity demanded.
D) 5 percent increase 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 1.5, a 3% decrease in price results in a 4.5% increase in quantity demanded (1.5 * 3% = 4.5%).

If the Price Elasticity of Demand for a Good Is