The price of a good rises from €10 to €12 and the quantity demanded falls from to . What is the price elasticity of demand (using the simple percentage method)?
Answer and explanation
Correct answer: A.
- Step 1: Quantity change: ; price change: . Step 2. Elasticity , which has absolute value below , so demand is inelastic. **Answer: . Why not the others:** The ratio is inverted in the option , so demand is elastic, and the other values do not follow from the numbers.
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