Studio clothing store knows that the price elasticity of demand for its jeans is 2.5.If the price of jeans were to increase by 10%,the quantity of jeans demanded would
A) rise by 25%.
B) fall by 25%.
C) rise by 4%.
D) fall by 4%.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is % Change in Quantity Demanded / % Change in Price. With an elasticity of 2.5 and a price increase of 10%, the quantity demanded would fall by 25% (2.5 * 10%).

Studio Clothing Store Knows That the Price Elasticity of Demand