If we know that the elasticity of demand for steak is -1.3 and we observe that there was a 15% increase in the price of steak then what must have happened to the quantity demanded of steak?
If we know that the elasticity of demand for steak is -1.3 and we observe that there was a 15% increase in the price of steak then what must have happened to the quantity demanded of steak?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![**Question:**
If we know that the elasticity of demand for steak is -1.3 and we observe that there was a 15% increase in the price of steak, then what must have happened to the quantity demanded of steak?
- ○ decreased by 19.5%
- ○ increased by 19.5%
- ○ increased by 11.5%
- ○ decreased by 11.5%
**Analysis:**
Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as:
\[ \text{Percentage Change in Quantity Demanded} = \text{PED} \times \text{Percentage Change in Price} \]
Given,
- PED = -1.3
- Percentage Change in Price = 15%
Using the formula:
\[ \text{Percentage Change in Quantity Demanded} = -1.3 \times 15\% = -19.5\% \]
Hence, the correct option is:
- ○ decreased by 19.5%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F93fbfeb8-1c04-41c5-8fc7-ef71b3e51d51%2Fdc1df905-6d64-4f4c-a555-f411edb46d9e%2F1688tp4_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Question:**
If we know that the elasticity of demand for steak is -1.3 and we observe that there was a 15% increase in the price of steak, then what must have happened to the quantity demanded of steak?
- ○ decreased by 19.5%
- ○ increased by 19.5%
- ○ increased by 11.5%
- ○ decreased by 11.5%
**Analysis:**
Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as:
\[ \text{Percentage Change in Quantity Demanded} = \text{PED} \times \text{Percentage Change in Price} \]
Given,
- PED = -1.3
- Percentage Change in Price = 15%
Using the formula:
\[ \text{Percentage Change in Quantity Demanded} = -1.3 \times 15\% = -19.5\% \]
Hence, the correct option is:
- ○ decreased by 19.5%
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