Suppose that the percentage change in demand is 20%, the price elasticity of supply is 2, and the percentage change in the equilibrium price is 4%. What is the price elasticity of demand?
A) 0
B) 1
C) 2
D) 3

Question

Quizplus · Accepted Answer

The price elasticity of demand can be calculated using the formula: Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price). Given that the percentage change in demand is 20% and the percentage change in equilibrium price is 4%, the price elasticity of demand = 20% / 4% = 5. However, since this option is not available, it seems there was a mistake in my calculation or interpretation of the provided options. Let's correct the approach based on the information given and the standard formula for elasticity.Given:- Percentage change in demand = 20%- Price elasticity of supply = 2- Percentage change in equilibrium price = 4%We can use the formula for combined elasticity when both supply and demand change, which is not directly provided but can be inferred from the given data. The correct approach involves understanding how the elasticity of demand and supply interact to affect price changes, but without the direct formula or additional information on how these values interact in this context, a direct calculation as initially described cannot be accurately completed. My initial explanation mistakenly calculated an elasticity of demand not reflected in the provided options, indicating a misunderstanding of the question's requirements or a misapplication of the formulas related to price elasticity.Revisiting the problem with the correct interpretation based on the options provided and without making assumptions beyond the given data would be necessary to accurately determine the price elasticity of demand. However, without the correct application of economic principles and formulas specific to this scenario, the initial answer provided was incorrect.

Suppose That the Percentage Change in Demand Is 20%, the Price