If the price of a good increases by 15% and quantity demanded changes by 20%,then the price elasticity of demand is equal to:

A) 0.75.
B) approximately 0.33.
C) approximately 1.33.
D) 1.

Question

If the price of a good increases by 15% and quantity demanded changes by 20%,then the price elasticity of demand is equal to:A) 0.75.B) approximately 0.33.C) approximately 1.33.D) 1.

2420 Aarti Singh · Accepted Answer

Final Answer : C, Explanation :  Price elasticity of demand (PED) is calculated as the percentage change in quantity demanded divided by the percentage change in price.PED = (% change in quantity demanded) / (% change in price)Given that the price of the good has increased by 15%, i.e., %∆P = 15.Also, the quantity demanded has changed by 20%, i.e., %∆Q = 20.Thus,PED =  (% change in quantity demanded) / (% change in price)PED = (%∆Q) / (%∆P)PED = 20 / 15PED = 1.33 (approx)Hence, the correct choice is (C).

If the price of a good increases by 15% and quantity demanded changes by 20%,then the price elasticity of demand is equal to:

A) 0.75.
B) approximately 0.33.
C) approximately 1.33.
D) 1.

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