Question

A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is?

a)2.0
b)10.0
c)0.5
d)20.0

Answer 1

(a) 2%

Explanation:

The degree to which people, customers, or producers adjust their demand or the amount provided in reaction to price or income fluctuations is referred to as price elasticity.

Own price Elasticity of any commodity = $\frac{percentage-change-in-quantity-demanded}{percentage-change-in-own-price}$

Here, Percent increase in quantity demanded of pizza is given as 20%

and percent decrease in price is 10%.

Therefore, Elasticity of demand for pizza =$-\frac{20}{10}$ = - 2 %.

Here we consider a modulus value of elasticity hence answer = 2%.