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13 October, 17:44

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is: A. - 1.5B. - 0.15C. - 0.67D. - 67

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  1. 13 October, 18:10
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    Correct option is (A)

    Explanation:

    Given:

    Percentage change in price = 10%

    Decrease in quantity demanded in terms of percentage = - 15%

    Price elasticity of demand measures the proportional change in quantity demanded due to proportional change in price. It is given by the following formula:

    Price elasticity of demand = % change in quantity demanded / % change in price.

    = - 15% / 10%

    = - 1.5

    A negative coefficient of price elasticity goes with the law of demand that states that increase in prices lead to decrease in quantity demanded.
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