When a product's price increases from $800 to $1,200, the quantity demanded decreases from 11,000 to 9,000. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:
A)0.5.
B)2.0.
C)0.25.
D)4.0.

Question

When a product's price increases from $800 to $1,200, the quantity demanded decreases from 11,000 to 9,000. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:
A)​0.5.
B)​2.0.
C)​0.25.
D)​4.0.

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((9,000 - 11,000) / 11,000) = -18.18%. The percentage change in price is ((1,200 - 800) / 800) = 50%. The elasticity is |-18.18% / 50%| = 0.3636, which rounds to 0.5.

When a Product's Price Increases from $800 to $1,200, the Quantity