A absolute price elasticity of 0.4 indicates thata A. 1 percent increase in pric

Question

A absolute price elasticity of 0.4 indicates thata A. 1 percent increase in price leads to a 4 percent decrease inquantity demanded. C. 10 percent decrease in price leads to a 4 percent increase inquantity demanded. D. 0.4 percent decrease in price leads to a 1 percent increase inquantity demanded.
A absolute price elasticity of 0.4 indicates thata A. 1 percent increase in price leads to a 4 percent decrease inquantity demanded. C. 10 percent decrease in price leads to a 4 percent increase inquantity demanded. D. 0.4 percent decrease in price leads to a 1 percent increase inquantity demanded.

Explanation / Answer

The formula is E=price/(quantity demanded) For (a), the E=|(-4/0.01)| =4.       (c) E=(4/10)=0.4      (d) E=(1/0.4) Answer: C. 10percent decrease in price leads to a 4 percent increase in quantitydemanded.

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