Question

Suppose that a 2% increase in price results in a 6% decrease in quantity demanded. Own-price elasticity of demand is equal to:

Answer 1

Own-price elasticity of demand is nothing but just the price elasticity of demand which means the percentage change in quantity demanded divided by percentage change in price.

Therefore, own-price elasticity of demand :-           = -6(as demand falls by 6%) / 2(as price rise by 2%)    = -3 or 3.

Thus price elasticity of demand is 3. Here negetive sign is not needed because it is expected that there will be a negetive or inverse relationship between price and quantity demanded.