If the price elasticity of demand is 0.5, this means that a ________ increase in price causes a ________ decrease in quantity demanded.
A) 20%; 100%
B) 30%; 15%
C) 20%; 1%
D) 5%; 1%

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. A price elasticity of 0.5 means that for every 1% increase in price, the quantity demanded decreases by 0.5%. Therefore, a 30% increase in price would lead to a 15% decrease in quantity demanded.

If the Price Elasticity of Demand Is 0