Question

The elasticity of demand for a good is –0.75. A 4% increase in price will cause a:______.

A) 3% iecrease in quantity demanded.B) 5.33% decrease in quantity demanded.C) 5.33% increase in quantity demanded.D) 0.19% decrease in quantity demanded.

Answer 1

A) 3% decrease in quantity demanded.

Step-by-step explanation:

As we know that

The price elasticity of demand is

= Percentage Change in quantity demanded ÷ Percentage change in price

Since the elasticity of demand is -0.75

And, there is a price of 4%

Since, the price elasticity of demand is in negative that means the quantity demanded is decreased by 3% that comes from

= 4% × - 0.75

= -3%

Hence, the first option is correct