Question

If the percentage increase in demand is 15 when the percentage decrease in price 20, which of the following statements is true

Answer 1

Answer:

decrease by 45%

This is the correct answer because the elasticity of demand is 3, which means demand is highly elastic. It means any change in price level leads to have negative impact on the demand. Here, price elasticity of demand is the ratio of percentage change in the demand to the percentage change in price. The percentage change in the price is given as 15%. So, the demand will reduce by 45%.