Question

Please explain the answer thoroughly, especially for number 1. Thank you!

When the price elasticity of demand is -0.6, then an quantity demanded increase in price leads to a in A. 1 percent; 6 percent decrease B.10 percent; 6 percent increase C. 10 percent; 6 percent decrease E. 6 percent; 6 percent increase D. 6 percent; 1 percent decrease 18. What will an individual do differently as a seller in the black market in the long run? a.He or she will substitute away from producing the product b.He or she will substitute toward producing the product c.When there exists a binding price floor, he or she will be able to sell the good at a higher price. d. When there exists a binding price ceiling, he or she will be able to sell the good at a lower price

Answer 1

Price elasticity of demand = % age Change in quantity demanded / % age Change in Price

So when Price elasticity of demand = -0.6

% age Change in quantity demanded / % age Change in Price = -0.6

% age Change in quantity demanded = -0.6 * % age Change in Price

So when there is a 10% increase in price,

% age Change in quantity demanded = -0.6 * 10% = -6%

So there is a decrease in % age Change in quantity demanded by 6%

So option C is correct

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