Question 8 of 20
5.0/ 5.0 Points
Suppose that the percentage change in demand is 20%, the price elasticity of supply is 2, and the percentage change in the equilibrium price is 4%. What is the price elasticity of demand?
A. 0
B. 1
C. 2
D. 3
To find the price elasticity of demand in this scenario, we need to use the formula:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Given that the percentage change in demand is 20% and the percentage change in the equilibrium price is 4%, we can substitute these values into the formula.
Percentage Change in Quantity Demanded = 20%
Percentage Change in Price = 4%
Price Elasticity of Demand = (20%) / (4%)
Simplifying the expression, we get:
Price Elasticity of Demand = 5
Therefore, the price elasticity of demand in this scenario is 5. Since none of the answer options provided match this result, none of the options (A, B, C, or D) is correct.