If the price elasticity of demand for a good is 0.3,then a 20 percent decrease in price results in a
A)0.015 percent increase in the quantity demanded.
B)0.6 percent increase in the quantity demanded.
C)6 percent increase in the quantity demanded.
D)66 percent increase in the quantity demanded.

Question

Quizplus · Accepted Answer

The price elasticity of demand formula is (% change in quantity demanded / % change in price). Here, the elasticity coefficient is 0.3, which means that a 1% decrease in price will result in a 0.3% increase in quantity demanded. So, a 20% decrease in price will result in a (20 x 0.3) = 6% increase in the quantity demanded. Therefore, the correct choice is C.

If the Price Elasticity of Demand for a Good Is