If the price elasticity of demand coefficient is 4, then:

A. a price increase of 1% will reduce quantity demanded by 1/4%.

B. a price increase of 1% will reduce quantity demanded by 4%.

C. a price decrease of 1% will reduce quantity demanded by 1/4%.

D. a price decrease of 1% will reduce quantity demanded by 4%.

B. A price decrease of 1% will reduce quantity demanded by 4%.

Reason: The demand has an inverse relationship with the price of the good. So when the elasticity of demand coefficient is 4, it means that a 1% increase / decrease in price of the good will result in 4% decrease/ increase in quantity demanded of the good respectively. Also, it should be noted that, the positive elasticity coefficient represents the absolute elasticity, whereas the actual elasticity coefficient will be -4.