Question

A study found that, among addicted smokers, a 10 percent increase in the price of cigarettes resulted in a 2 percent decrease in quantity demanded. For these consumers, cigarettes have a(n) ________ price elasticity demand.

Answer 1

Answer:

inelastic PED

Explanation:

Price elasticity of demand (PED) is the proportional change in quantity demanded of a good or service if the price changes by 1%. The PED is calculated by dividing the percentage change in quantity demanded by the negative percentage change in price.

PED = -2% / -10% = 0.2 inelastic

If PED > 1, elastic demand

If PED < 1, inelastic demand

If PED = 1, unitary demand