Question

The price elasticity of demand for leisure air travel is 1.60. Therefore, a 

A 10 percent decrease in the price of leisure air travel will cause a 16 percent decrease in the amount of leisure air travel.

B. 10 percent decrease in the price of leisure air travel will cause a 16 percent increase in the amount of leisure air travel. 

C. 16 percent decrease in the price of leisure air travel will cause a 10 percent increase in the amount of leisure air travel. 

D. a 16 percent decrease in the price of leisure air travel will cause a 10 percent decrease in the amount of leisure air travel.

Answer 1

Answer
Option B
price elasticity of demand =%change in quantity /%change in price
=16/10
=1.6
the 10% change in price changes 16% in quantity
as the price and quantity are related inversely so the decrease in price increases quantity and vice verse.

Answer 2

SOLUTION :

OPTION B :

10% decrease in the price of leisure air travel will cause 16% increase in the amount of leisure air travel.  

Explanation :

Price decrease increases quantity of air travel.

Elasticity of price = % increase in qty of travel / % decrease in price = 1.6

=>  % increase in qty of travel = 1.6 * % decrease in price 

=> % increase in qty of travel = 1.6 * 10 % 

=>  % increase in qty of travel = 16 % (ANSWER)