If the price elasticity of demand for a good is 5.0, then a 10 percent increase in price results in a
A)0.5 percent decrease in the quantity demanded.
B)2.5 percent decrease in the quantity demanded.
C)5 percent decrease in the quantity demanded.
D)50 percent decrease in the quantity demanded.

Question

If the price elasticity of demand for a good is 5.0, then a 10 percent increase in price results in a
A)​0.5 percent decrease in the quantity demanded.
B)​2.5 percent decrease in the quantity demanded.
C)​5 percent decrease in the quantity demanded.
D)​50 percent decrease in the quantity demanded.

Quizplus · Accepted Answer

The price elasticity of demand formula is the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 5.0, a 10 percent increase in price leads to a 5 * 10% = 50% decrease in quantity demanded.

If the Price Elasticity of Demand for a Good Is