If an increase in the price of oil by 10 percent would cause the quantity demanded for oil to fall by 5 percent, the elasticity of demand for oil in absolute terms is:
A) 10.
B) 5.
C) 2.
D) 0.5.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is -5% / 10% = -0.5. In absolute terms, it is 0.5.

If an Increase in the Price of Oil by 10