Question

. If the price elasticity of demand for pineapple is 0.75, a 4% increase in the price of pineapple will lead to a A. 3% decrease in the quantity demanded of pineapple. B. 3% increase in the quantity demanded of pineapple.C. 4% decrease in the quantity demanded of pineapple.D. 3/16% increase in the quantity demanded of pineapple.

Answer 1

Answer:

The correct option is A: 3% decrease in the quantity demanded of pineapple.

Explanation:

The price elasticity of demand can be calculated by checking the percentage change in the quantity of a product demanded by consumers and divided by the percentage change in the price of the product. Hence, if the price elasticity is 0.75, this means that 0.75*4 = 3

Hence there will be a 3% decrease in the quantity demanded, because as price increases, the quantity demanded decreases when talking about price elasticity of demand.

Answer 2

Answer:

A) 3% decrease in the quantity demanded of pineapple.

Explanation:

We know that the demand curve is negative, which means that as price of a product increases, its demand will decrease.

In unitary elasticity(1) the change in demand means that the change in quantity demanded will be the same. A 0.75 elasticity will thus mean that the quantity demanded will change by a factor of 0.75 as compared to the change in price.  

Therefore when the price of pineapple increases by 4%, the quantity demanded will decrease by 4 * 0.75 = 3%