The price elasticity of demand for color printers is 1.6 and you would like to see the quantity demanded for color printers to increase by 32%. Then the percentage change in price should be
A) 10%.
B) 15%.
C) 20%.
D) 25%.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is: Elasticity = (% Change in Quantity Demanded) / (% Change in Price). Given an elasticity of 1.6 and a desired increase in quantity demanded of 32%, we solve for the % Change in Price: 1.6 = 32% / (% Change in Price), which gives a % Change in Price of 20%.

The Price Elasticity of Demand for Color Printers Is 1