If the price elasticity of demand for a good is 1.65 then a 3percent decrease in
ID: 1251355 • Letter: I
Question
If the price elasticity of demand for a good is 1.65 then a 3percent decrease in price results in a a. 0.55 percent increase in the quantity demanded. b .1.82 percent increase in the quantity demanded. c. 4.95 percent increase in the quantity demanded. d. 5.55 percent increase in the quantity demanded. If the price elasticity of demand for a good is 1.65 then a 3percent decrease in price results in a a. 0.55 percent increase in the quantity demanded. b .1.82 percent increase in the quantity demanded. c. 4.95 percent increase in the quantity demanded. d. 5.55 percent increase in the quantity demanded.Explanation / Answer
Price elasticity is the change in quantity demanded divided by aone percent increase/decrease in price (depending on the sign,different books have different convention, using absolute value,etc). If 1.65 units are purchased for a 1% decline, then for a threepercent decline, just multiply 1.65 by 3 Your answer is c. 4.95.