If the demand for a product decreases by 16 percent and the supply elasticity is 1.2 and demand elasticity is 0.80. Then the equilibrium price will decrease by 6 percent.

Question

Quizplus · Accepted Answer

The change in equilibrium price due to changes in demand and supply depends on both the demand and supply elasticities, not just the percentage change in demand. The given elasticities and demand change alone do not provide enough information to accurately calculate the exact percentage change in equilibrium price without considering the initial conditions and how supply reacts.

If the Demand for a Product Decreases by 16 Percent