Question

If the price of good X falls by 8 percent and as a result the quantity demanded of good X rises by 4 percent, the absolute value of the coefficient of price elasticity of demand for good X is _____________ and good X is price _______________ in demand in the current price range.

Answer 1

-0.5; Inelastic

Step-by-step explanation:

Given that,

Decrease in the price of good X = 8 percent

As a result, increase in the quantity demanded for good X = 4 percent

Here, we are using the percentage method,

Price elasticity of demand:

= Percentage change in the quantity demanded ÷ Percentage change in the price

= 4 ÷ 8

= -0.5

The good X is price inelastic in demand because a change in price have a relatively smaller impact on the quantity demanded for a good.