If the price elasticity of demand for a product is 0.5, then a price cut from $3.00 to $2.70 will 15 Multiple Choice eBook increase the quantity demanded by about 50 percent. decrease the quantity demanded by about 5 percent. increase the quantity demanded by about 5 percent. increase the quantity demanded by about 20 percent.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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### Question 15

**If the price elasticity of demand for a product is 0.5, then a price cut from $3.00 to $2.70 will:**

#### Multiple Choice Options:
- O increase the quantity demanded by about 50 percent.
- O decrease the quantity demanded by about 5 percent.
- O increase the quantity demanded by about 5 percent.
- O increase the quantity demanded by about 20 percent.

**Explanation:**  
The question tests the understanding of the price elasticity of demand, which measures how much the quantity demanded of a good responds to a change in price. The elasticity coefficient of 0.5 indicates that the demand is inelastic; thus, a price cut should increase quantity demanded, but by a proportionally smaller percentage than the price decrease.
Transcribed Image Text:### Question 15 **If the price elasticity of demand for a product is 0.5, then a price cut from $3.00 to $2.70 will:** #### Multiple Choice Options: - O increase the quantity demanded by about 50 percent. - O decrease the quantity demanded by about 5 percent. - O increase the quantity demanded by about 5 percent. - O increase the quantity demanded by about 20 percent. **Explanation:** The question tests the understanding of the price elasticity of demand, which measures how much the quantity demanded of a good responds to a change in price. The elasticity coefficient of 0.5 indicates that the demand is inelastic; thus, a price cut should increase quantity demanded, but by a proportionally smaller percentage than the price decrease.
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