Question

if the price elasticity of demand is 0.6, then a 10 percent increase in the price of the good will lead to a __________ in the quantity demanded

Answer 1

Answer:

60 % decrease

Explanation:

price elasticity of demand can be calculated by the following formula;

percentage change in quantity demanded (∆QD)

percentage change in price (∆P)

Here, change in price is 10%

price elasticity of demand is 0.6

So, by substituting the given values in the above stated formula, we get;

0.6 = ∆QD/10

∆QD = 0.6×10

∆QD = 60

since, price is increasing by 10% this quantity demanded (60%) has to decrease according to law of demand