If the price of IPads rises by 20 per cent and quantity demanded for IPads decreases by 30 per cent, the price elasticity of demand would be:

Question

BlackTom AI · Accepted Answer

Price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price, so we can compute it directly. 1. Relevant knowledge points and concepts - Price elasticity of demand (PED) = (% change in quantity demanded) / (% change in price). - By convention PED for a normal downward‑sloping demand curve is negative (because quantity falls when price rises); often we report the absolute value to indicate responsiveness. - If |PED| > 1 demand is elastic (quantity responds proportionally more than price); if |PED| = 1 it is unit elastic; if |PED| < 1 it is inelastic. 2. Step‑by‑step reasoning - We are given: price rises by 20% and quantity demanded decreases by 30%. - Translate to percent changes: %ΔP = +20%; %ΔQ = −30% (decrease). 3. Intermediate calculations - PED = (%ΔQ) / (%ΔP) = (−30%) / (+20%) = −1.5. - Absolute value |PED| = 1.5. 4. Why the correct answer is correct - The computed elasticity magnitude 1.5 is greater than 1, so demand is elastic. This means quantity demanded changed proportionally more than price (a 20% price increase caused a 30% fall in quantity). 5. Why the other options are incorrect - a. equal to 1: incorrect because |PED| = 1.5, not 1. - b. less than 1: incorrect because |PED| > 1, not < 1. - c. cannot be determined: incorrect because the required percent changes are given so PED can be computed directly. 6. Conclusion confirming the answer - The price elasticity of demand is −1.5 (absolute value 1.5), therefore the correct choice is d. greater than 1.

If the price of IPads rises by 20 per cent and quantity demanded for IPads decreases by 30 per cent, the price elasticity of demand would be:单项选择题

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