An increase of 2 percent in price results in a decrease of 4 percent in quantity...
An increase of 2 percent in price results in a decrease of 4 percent in quantity demanded.
Using averages, the absolute value of the price elasticity of demand is?
Homework Answers
Demand elasticity = % change in the demand / % change in the price.
= (-4 / 2 ) / 2
= -2 / 1
= -2
The price elasticity of demand in this case if -2% if the price decreases by 2% the demand in the market will increase by 4%.
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