Question

During last year the price of regular unleaded gasoline in Oakland, California increased 10 percent. If the price elasticity of demand for gasoline was 2, the price hike means that the quantity demanded decreased by A. 2 percent. B. 10 percent. C. 1 percent. D. 20 percent.

Answer 1

D. 20 percent.

Step-by-step explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

2 = percentage change in quantity demanded / 10%

Percentage change in quantity demanded = 20%

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