Question

Suppose the elasticity of demand for cereal is 1. if cereal increases in price by 25 percent, how much will the quantity demanded decrease by?12.5 percent

Answer 1

If cereal increases in price by 25% the quantity demanded will decrease by 25%. Elasticity of demand is what describes the sensitivity of price change with the change of demand in an item. In many situations, if a price increases by a certain amount it will also drop by the same amount in demand. Pricing directly relates to the demand and supply of a good or service.

Answer 2

25 percent is the answer