Question

if the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Answer 1

A 12 percent increase in the quantity demanded must be the result of a 15% decrease in the price.

Given the data in the quest;

• Price Elasticity of demand; $_PE_d = 0.8$

• Increase in the Quantity demanded; $Q_d = 12\% = 0.12$

Price elasticity of demand $_PE_d$ is simply the estimate of the difference in the quantity purchased of a product with respect to the difference in its price.

Now, Price elasticity of demand $_PE_d$ by Percentage Method:

$_PE_d$  = percentage change in quantity demand / percentage change in price

$_PE_d =\frac{q_1-q_2}{q_1}\ *\ \frac{p_1}{p_2-p_1}$

That is; $_PE_d =\frac{Q_d}{percentage\ change\ in\ price}$

We substitute in our values

$0.8 = \frac{0.12}{percentage\ change\ in\ price}$

$Percentage\ change\ in\ price = \frac{0.12}{0.8}$

$Percentage\ change\ in\ price = 0.15 = 15\%$

Therefore, A 12 percent increase in the quantity demanded must be the result of 15% decrease in the price.

Learn more; brainly.com/question/24904215