If quantity decreases by 15 percent when prices increase 5 percent,then elasticity for this product is _____
A)15.
B)10.
C)5.
D)3.
E)1.

Question

Quizplus · Accepted Answer

Elasticity is calculated as the percentage change in quantity divided by the percentage change in price. In this case, the percentage change in quantity is -15% (a decrease) and the percentage change in price is +5% (an increase). Therefore, the elasticity is (-15%/+5%) = -3. This means that a 1% increase in price will lead to a 3% decrease in quantity demanded, indicating that the product is relatively elastic.

If Quantity Decreases by 15 Percent When Prices Increase 5