If the price elasticity of demand is 1.8 then a 30 percent decrease in the price of the good will lead to a _______ percent increase in the quantity demanded.
A) 0.60
B) 0.55
C) 54.00
D) 16.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is % Change in Quantity Demanded / % Change in Price. Given a price elasticity of 1.8 and a 30% decrease in price, the calculation is 1.8 * (-30%) = -54%. The negative sign indicates direction (in this case, a decrease in price leads to an increase in quantity demanded), so the answer is a 54% increase in quantity demanded.

If the Price Elasticity of Demand Is 1