Assume that the price elasticity of demand equals .2 (e_d = .2).Given a 10 percent increase in price,there will be a A)20 percent increase in the quantity demanded. B)2 percent decrease in the quantity demanded. C)20 percent decrease in the quantity demanded. D)2 percent increase in the quantity demanded. E).2 percent decrease in the quantity demanded.

Question

Quizplus · Accepted Answer

Price elasticity of demand of 0.2 means that for every 1% increase in price, quantity demanded decreases by 0.2%. Therefore, a 10% increase in price results in a 2% decrease in quantity demanded.

Assume That the Price Elasticity of Demand Equals