Question

1. Let the short-run price elasticity of demand be -0.10. This suggests that if the price of electricity rises from $0.05 to $0.06/kWh, that the quantity demanded of electricity will

   		Decrease 1%
   		Decrease 2%
   		Decrease 10%
   		Decrease 50%

Answer 1

Option 2

P	Q	%P	%Q	Ed=%Q/%P
0.05	2
0.06	1.96	=((0.06-0.05)/0.05)*100 =20%	=((1.96-2)/2)*100 =-2%	-2%/20% =-0.1

From the above table we can observe that the quantity decreases by 2%