The price of a good rises by 4 % and the quantity demanded falls by 12 %. What is the absolute value of the price elasticity of demand?
Answer and explanation
Correct answer: C. 3
- Step 1: Elasticity = % change in quantity / % change in price. Step 2. 12 / 4 = 3. Answer: 3. Why not the others: 0.333333: the ratio was inverted. 8: the percentages were subtracted. 48: the percentages were multiplied.
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