In: Economics
Suppose the price elasticity of demand for good air travel is -1.5. Which of the following is a proper interpretation of the price elasticity of demand.
a |
For every 1% increase in the price, the quantity of air travel purchased will increase 1.5% |
b |
For every 1.5% increase in the price, the quantity of air travel purchased will increase 1% |
c |
For every 1% increase in the price, the quantity of air travel purchased will decrease 1.5% |
d |
For every 1.5% increase in the price, the quantity of air travel purchased will decrease 1% |
Ans) the correct option is c) For every 1% increase in the price, the quantity of air travel purchased will decrease 1.5%
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
= -1.5/ 1 = -1.5