Final answer:
A price elasticity of -2 indicates that a 1% reduction in price will lead to a 2% increase in the quantity demanded, representing an elastic demand where the quantity response is proportionally larger than the price change.
Step-by-step explanation:
A price elasticity of -2 means that a price reduction of one percent will result in an increase in volume by 2%. Price elasticity of demand is illustrated on a downward sloping demand curve, where the negative sign indicates the inverse relationship between price and quantity demanded, though we interpret the number as an absolute value. In this case, a price elasticity of -2 implies that for every 1% decrease in price, there is a 2% increase in the quantity demanded. This is a case of elastic demand, where the percentage change in quantity demanded is greater than the percentage change in price.