If the price elasticity of demand for Good A is -0.2 and the price increases from $2.25 to $2.75,the percentage change in the quantity demanded of Good A is
A) -100 percent.
B) 100 percent.
C) 4.0 percent
D) -4.0 percent.
E) unknown because not enough information is provided.

Question

Quizplus · Accepted Answer

Using the formula for percentage change in quantity demanded due to a change in price:

%ΔQ = (Elasticity of demand) x (%ΔP)

%ΔP = [(New price - Old price) / Old price] x 100% 
%ΔP = [(2.75 - 2.25) / 2.25] x 100% = 22.22%

%ΔQ = (0.2) x (22.22%) = 4.44% 
Therefore, the percentage change in quantity demanded of Good A is 4.44%, which is closest to choice D, F1F1F1S1-F1F1F104.0 percent.

If the Price Elasticity of Demand for Good a Is