Q24 of 26 Page 34

Suppose the price elasticity of demand for a good is – 0.2. If there is a 5 % increase in the price of the good, by what percentage will the demand for the good go down?

Price elasticity of demand = -0.2


Increase in price – 5%




% Change in Quantity demanded = -0.2 X 5 = -1%


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