Question

question 8
1 pts
suppose there is a 5 percent increase in
the price of good x and a resulting 10
percent decrease in the quantity of x
demanded. price elasticity of demand for
x is...

0

2

50

½

Explanation:

Step1: Recall the formula for price elasticity of demand

The formula for price elasticity of demand (\(E_d\)) is \(E_d=\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}\).

Step2: Identify the given percentage changes

The percentage change in price is \(+ 5\%\) (increase) and the percentage change in quantity demanded is \(- 10\%\) (decrease).

Step3: Substitute the values into the formula

Substitute the values into the formula: \(E_d=\frac{- 10\%}{5\%}\). The negative sign indicates the inverse relationship between price and quantity demanded, but we usually take the absolute value for the elasticity measure. So, \(\vert E_d\vert=\frac{10}{5} = 2\).

Answer:

2 (corresponding to the option with value 2)