If a 10 percent increase in price leads to a 20 percent decrease in quantity demanded, the elasticity of demand is

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Improve your understanding of Elasticities of Demand and Supply. This test includes multiple choice questions with explanations to get you exam-ready. Enhance your knowledge and excel on your test.

Multiple Choice

If a 10 percent increase in price leads to a 20 percent decrease in quantity demanded, the elasticity of demand is

Elasticity of demand measures how much quantity demanded responds to a price change, calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, a 10 percent price increase leads to a 20 percent drop in quantity demanded. The ratio is 20% / 10% = 2 in magnitude, and with the inverse relationship, the sign is negative, so PED = -2. The magnitude being greater than 1 shows elastic demand. The correct numerical value is 2.0.

If a 10 percent increase in price leads to a 20 percent decrease in quantity demanded, the elasticity of demand is

Improve your understanding of Elasticities of Demand and Supply. This test includes multiple choice questions with explanations to get you exam-ready. Enhance your knowledge and excel on your test.

If a 10 percent increase in price leads to a 20 percent decrease in quantity demanded, the elasticity of demand is

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