Stone Restaurant, a five-star restaurant, changes its centerpiece, such as candles and vases, every day. The waiters also creati
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A 15 percent increase in the price will result in 18% decrease in quantity demanded.
What is Price Elasticity Of Demand?
Price elasticity of demand is defined as the the change in the rate of consumption of a particular product with respect to the change in its price. It is given as is the ratio of the percentage change in the quantity demanded of a product to the percentage change in price.
Simply put;
Price elasticity of demand = percentage change in quantity demand / percentage change in price
=
;
=
We were given that
- Price Elasticity of demand; pEd 1.20
- Increase in the price ; 15%
Plugging in our values, we have that
1.20 =
Percentage change in quantity demanded =0.18 =18%
Therefore, A 15 percent increase in the price will result to an 18% decrease in quantity demanded.
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