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Sagot :
When a 15% increase in price results in a 20% decrease in quantity demanded of a good, it is concluded that the price elasticity of demand is negative or more than -1.
- There is a negative price elasticity of demand, meaning that the 15% increase in price brings out a higher (20% decrease) negative change in the quantity demanded by consumers.
Data and Calculations:
Percentage change in quantity demand = 20%
Percentage change in price = 15%
Price elasticity of demand = % Change in Quantity Demand/% Change in Price
= -20%/15%
= -1.33
- The change is negative as a normal demand curve should be.
Thus, the price elasticity of demand for this good is negative.
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