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In: Economics

If a 20 per cent reduction in the price of Hello magazine leads to a 6...

If a 20 per cent reduction in the price of Hello magazine leads to a 6 per cent increase in its sales, the price elasticity of demand is what?

Solutions

Expert Solution

Price elasticity of demand = Percentage change in quantity demanded ÷ percentage change in price.

Thus, Price elasticity of demand in the given case =

6% ÷ (-20%) = 0.06 ÷ (-0.2) = -0.3

Thus, the price elasticity of demand is -0.3.

Rahul Sunny answered 2 years ago
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