Question

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

Answer 1

Increase quantity demanded by 5 percent

Answer 2

Decrease quantity demanded by 5 percent

Given that;

Price elasticity of demand for a product = 0.5

Percent decrease in price = 10 percent

Find:

Decrease quantity demanded

Computation

10 Percent decrease in price = 0.5 x 10%

10 Percent decrease in price = 5%

Decrease quantity demanded by 5 percent

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