Suppose the quantity demanded of a particular good increases by 30%, and (the absolute value of) the price elasticity of demand

Question

3 years ago

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Suppose the quantity demanded of a particular good increases by 30%, and (the absolute value of) the price elasticity of demand

of this good is known to be 2. How must the price have changed?a. it increased by 15%b. it decreased by 66%c. it decreased by 15%d. it increased by 66%

Business

1 answer:

viktelen [127] · Answer 1 · 2022-06-30T17:32:46+03:00

Answer: Option (c) is correct.

Explanation:

Given that,

Quantity demanded increases by = 30%

Price elasticity of demand = 2

Therefore,

Price elasticity of demand = $\frac{Percentage\ change\ in\ quantity\ demanded}{Percentage\ change\ in\ prices}$

2 = $\frac{30}{Percentage\ change\ in\ prices}$

Percentage change in prices = $\frac{30}{2}$

= 15%

Therefore, price of a particular good decreases by 15%.