question archive If the price elasticity of demand for a good is 0
If the price elasticity of demand for a good is 0
Subject:EconomicsPrice:2.88 Bought3
If the price elasticity of demand for a good is 0.8, then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?
a. A 0.2 percent increase in the price of the good,
b. A 3.2 percent increase in the price of the good,
c. A 4.8 percent increase in the price of the good,
d. A 5 percent increase in the price of the good.
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- The correct answer is: d. A 5 percent increase in the price of the good.
Given that;
[Math Processing Error]Ed=−0.8%ΔQd=−4%
The change in price can be calculated using the formula for the elasticity of demand:
[Math Processing Error]Ed=%ΔQd%ΔP−0.8=−4%%ΔP%ΔP=−4%−0.8%ΔP=5%
The 4% decrease in quantity demanded was caused by a 5% increase in price, given that elasticity of demand is 0.8.
