Question

if the elasticity of demand for the latest taylor swift album is 1.4, this means
multiple choice
a 5 percent increase in the price leads to a 7 percent decrease in quantity demanded.
a 1 percent increase in the price leads to a 14 percent decrease in quantity demanded.
a 10 percent decrease in the price leads to a 140 percent increase in quantity demanded.
few substitutes for the american idol album exist.

Explanation:

The price elasticity of demand formula is \(E_d=\frac{\%\text{ change in quantity demanded}}{\%\text{ change in price}}\). Given \(E_d = 1.4\).
For the first option: \(\frac{- 7\%}{5\%}=-1.4\). The negative sign indicates the inverse relationship between price and quantity demanded (Law of Demand), and the magnitude \(1.4\) matches the given elasticity.
For the second option: \(\frac{-14\%}{1\%}=-14
eq1.4\).
For the third option: \(\frac{140\%}{- 10\%}=-14
eq1.4\).
The fourth option is about substitutes (a determinant of elasticity, but not directly calculating using the elasticity formula as in the first option).

Answer:

a 5 percent increase in the price leads to a 7 percent decrease in quantity demanded.