The price of turkey breast rises from $3.00 per pound to $3.60 per pound. In response to this price change, the quantity demanded for turkey breast falls by 40%. What is the absolute value of the price elasticity of demand for turkey breast?
A)0.5
B)-0.5
C)2
D)-2

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 price increases by 20% (from $3.00 to $3.60 is a $0.60 increase on $3.00, which is 20%), and the quantity demanded decreases by 40%. The formula for elasticity is: |(% change in quantity demanded) / (% change in price)| = |(-40%) / (20%)| = 2.

The Price of Turkey Breast Rises from $3