If the price of a good increases by 8% and the quantity demanded decreases by 12%,...
If the price of a good increases by 8% and the quantity demanded decreases by 12%, what is the own price elasticity of demand? Is it elastic, inelastic or unitary elastic?
Homework Answers
Answer
Price elasticity of demand =%change in quantity/%change in price
=(-12)/8=-1.5
=1.5 ( in absolute value)
The demand is elastic as the elasticity is above 1.
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