question archive A 60% increase in price causes the quantity demanded of a good to decrease by 30%, while the total revenue of that good increases by 15%
A 60% increase in price causes the quantity demanded of a good to decrease by 30%, while the total revenue of that good increases by 15%
Subject:EconomicsPrice:2.88 Bought3
A 60% increase in price causes the quantity demanded of a good to decrease by 30%, while the total revenue of that good increases by 15%. The value for the price elasticity of demand is _____, and demand is _____.
a. -0.5, elastic
b. -0.5, inelastic
c. -2, inelastic
d. -2, elastic
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The answer is b).
The price elasticity is the percentage change in quantity demanded divided by the percentage change in price, i.e.,
- -30% / 60% = -0.5
Since the price elasticity is less than one in absolute value, demand is inelastic.
