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Suppose the price elasticity of demand for a good is -0.2. If there is a 5% increase in the price of the good, by what percentage will the demand for the good go down ? |
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Answer» SOLUTION :`{:("% Change in% Change in"),(" Demand = ?Price = 5%"),(" Elasticity of Demand (ED) "=(-)0.2):}` Price Elasticity of Demand (ED) `=("% Change in quantity demanded")/("% Change in Price")` `(-)0.2=("quantity demanded")/(5%)` PERCENTAGE FALL in demand = 1% Demand for the PIECE of goods will fall by 1%. |
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