Question

In: Economics

Suppose the price elasticity of demand for good air travel is -1.5. Which of the following...

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%

Solutions

Expert Solution

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

Rahul Sunny answered 1 year ago
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