Suppose that the elasticity of demand for chocolate is 3.0 and price decreases by 20%. By what percentage will quantity demanded for chocolate increase?
A) 20%
B) 30%
C) 60%
D) 200%

Question

Quizplus · Accepted Answer

The percentage change in quantity demanded can be calculated using the price elasticity of demand formula: Elasticity = (% Change in Quantity Demanded) / (% Change in Price). Given an elasticity of 3.0 and a price decrease of 20%, the calculation is: 3 = (% Change in Quantity Demanded) / (-20%). Solving for the % Change in Quantity Demanded gives a 60% increase.

Suppose That the Elasticity of Demand for Chocolate Is 3