If the price elasticity of demand for automobiles is 2:
A) a 10 percent decrease in price would result in a 20 percent decrease in quantity demanded.
B) a 10 percent decrease in price would result in a 20 percent increase in quantity demanded.
C) a 10 percent increase in price would result in a 20 percent increase in quantity demanded.
D) a 10 percent increase in price would result in a 10 percent decrease in quantity demanded.

Question

Quizplus · Accepted Answer

According to the given price elasticity of demand of 2, a 10 percent decrease in price would result in a 20 percent increase in quantity demanded. This is because the demand for automobiles is elastic, which means that consumers are responsive to changes in price and a decrease in price would lead to a more than proportionate increase in quantity demanded.

If the Price Elasticity of Demand for Automobiles Is 2