The price of a firm's product declines from $15 to $9. As a result, the quantity demanded of the product increases from 60,000 to 100,000. The arc price elasticity of demand for the good is equal to
A) -100.
B) -10.
C) -1.
D) -0.1.

Question

Quizplus · Accepted Answer

The arc price elasticity of demand is calculated using the formula: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Plugging in the values: [(100,000 - 60,000) / (100,000 + 60,000)/2] / [(9 - 15) / (9 + 15)/2] = 40,000/80,000 / -6/12 = 0.5 / -0.5 = -1.

The Price of a Firm's Product Declines from $15 to $9