Final answer:
Price elasticity of demand is a measure from economics indicating how much the quantity demanded of a good changes in response to a price change. By dividing the percentage change in quantity demanded by the percentage change in price (40%/20%), we find that for smoothies the demand is elastic with a value of 2.
Step-by-step explanation:
The question is about the concept of price elasticity of demand, which is a measure used in economics to show how the quantity demanded of a good or service is affected by a change in its price. Specifically, it refers to the ratio of the percentage change in quantity demanded to the percentage change in price.
In the given example, the price elasticity of demand for smoothies is calculated by dividing the percentage change in quantity demanded (40%) by the percentage change in price (20%), which would yield a result of 2. This indicates that for every 1% increase in price, the quantity demanded of smoothies would decrease by 2%. Such a calculation helps us understand whether a product has an elastic, inelastic, or unitary demand.