If a 10% decrease in the price of a good leads to a 20% increase in the quantity demanded, then what is the price elasticity of demand?
A)½.
B)2.
C)10.
D)20.

Question

Quizplus · Accepted Answer

Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price.

Here, we are given that a 10% decrease in price leads to a 20% increase in quantity demanded.

So, percentage change in quantity demanded = 20%  
and percentage change in price = 10%

Therefore, price elasticity of demand = (20%/10%) = 2

Hence, the answer is (B) 2.

If a 10% Decrease in the Price of a Good