If the price elasticity of demand is 1.5,and the prices gone up by 20 percent,the quantity sold will,ceteris paribus:
A) Rise by 13.3 percent.
B) Fall by 13.3 percent.
C) Rise by 30.0 percent.
D)Fall by 30.0 percent.

Question

Quizplus · Accepted Answer

Price elasticity of demand of 1.5 means that for every 1% increase in price, the quantity demanded decreases by 1.5%. Therefore, a 20% increase in price will lead to a 30% decrease in quantity demanded (20% * 1.5 = 30%).

If the Price Elasticity of Demand Is 1