Question

if price elasticity is 1.7 and price decrease by 8% what will be the quantity change will it increase or decrease?

Answer 1

Price elasticity ep = 1.7

Usually price elasticity is negative, however, it is positive for giffen goods.

Ep is positive here. Positive price elasticity indicates that when there is percentage increase in price, quantity demanded also rises and vice versa.

Here, elasticity is 1.7 means, 1% increase/decrease in price will lead to 1.7 times increase/decrease in quantity demanded of a product.

Quantity demanded will be changed by 1.7*8 = 13. 6 times of present quantity demanded.