**Understanding Price Elasticity of Demand**If a 15 percent increase in the price of Cheerios causes an 18 percent reduction in the number of boxes of cereal demanded, the price elasticity of demand for Cheerios is calculated as follows:**Price Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Price**In this scenario:- Percentage Change in Quantity Demanded = -18%- Percentage Change in Price = 15%Therefore, the price elasticity of demand is:\[ \text{Price Elasticity of Demand} = \frac{-18\%}{15\%} = -1.2 \](Enter your response rounded to two decimal places.)This result indicates that the demand for Cheerios is elastic, meaning the quantity demanded is quite responsive to price changes.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If a 15 percent increase in the price of Cheerios causes a 18 percent reduction in the number of boxes of cereal demanded, the price elasticity of demand for Cheerios is --1.2. (Enter your response rounded to two decimal places.)