Question

If the price elasticity of demand for a product is equal to 0.5, then a decrease in price of 10 percent will increase quantity demanded by

Answer 1

To calculate the change in quantity demanded resulting from a change in price when the price elasticity of demand is given, you can use the formula:

Percentage Change in Quantity Demanded = (Elasticity) x (Percentage Change in Price)

In this case, the price elasticity of demand (Elasticity) is given as 0.5, and the price is decreasing by 10 percent, which means the percentage change in price is -10% (negative because it's a decrease).

Let's calculate the change in quantity demanded:

Percentage Change in Quantity Demanded = (0.5) x (-10%) = -5%

So, a decrease in price of 10 percent will increase the quantity demanded by 5 percent.