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If the elasticity of demand for a product is 2, and the price decreases by 10%,

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Question: If the elasticity of demand for a product is 2, and the price decreases by 10%, what will be the percentage change in quantity demanded?

Options:

  1. 10%
  2. 20%
  3. 30%
  4. 40%

Correct Answer: 20%

Solution: 

Percentage change in quantity demanded = Elasticity * Percentage change in price = 2 * (-10%) = -20%

If the elasticity of demand for a product is 2, and the price decreases by 10%,

Practice Questions

Q1
If the elasticity of demand for a product is 2, and the price decreases by 10%, what will be the percentage change in quantity demanded?
  1. 10%
  2. 20%
  3. 30%
  4. 40%

Questions & Step-by-Step Solutions

If the elasticity of demand for a product is 2, and the price decreases by 10%, what will be the percentage change in quantity demanded?
  • Step 1: Understand what elasticity of demand means. It measures how much the quantity demanded of a product changes when the price changes.
  • Step 2: Identify the given elasticity of demand, which is 2 in this case.
  • Step 3: Note the percentage change in price, which is a decrease of 10%. This is represented as -10%.
  • Step 4: Use the formula for percentage change in quantity demanded: Percentage change in quantity demanded = Elasticity * Percentage change in price.
  • Step 5: Substitute the values into the formula: Percentage change in quantity demanded = 2 * (-10%).
  • Step 6: Calculate the result: 2 * (-10%) = -20%.
  • Step 7: Interpret the result: A -20% means that the quantity demanded will increase by 20% when the price decreases by 10%.
  • Price Elasticity of Demand – The responsiveness of quantity demanded to a change in price, measured as the percentage change in quantity demanded divided by the percentage change in price.
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