Question

“If a 6 percent decrease in the price leads to a 5 percent increase in the quantity demand, the price elasticity of demand is “0.30.60831.2

Answer 1

Consider that the price elasticity of demand (E), percentage change in price (P), and percentage change in demand (D), are related as,

`E=(D)/(P)`

According to the given problem,

`\begin{gathered} D=5 \\ P=6 \end{gathered}`

Substitute the values,

`\begin{gathered} E=(5)/(6) \\ E\approx0.833 \end{gathered}`

Thus, the required price elasticity of demand is 0.83.