Question

Assume that the price elasticity if demand or Ed=.20. Given a 20% increase in price, there with be a _____ decease in quantity demanded.

Answer 1

Answer.

If the price elasticity of demand or Ed =.20.Given a 20% increase in price ,there will be a 4% decrease in quantity demanded.

Price elasticity of demand or Ed = .20.

Increase in price(percentage change in price) =20%

As per formula Elasticity of demand =% change in quantity demanded/ percentage change in price.

.20. =% change in quantity demanded/ 20%

% change in quantity demanded =20 % x .20 = 4%.

*(4% /20% =.20. % change in quantity demanded/ % change in price=Ed)