Suppose the price elasticity of demand for bread is 1.00. If the price of bread falls by 20%, the...

Question:

Suppose the price elasticity of demand for bread is 1.00. If the price of bread falls by 20%, the quantity demanded will increase by what?

Price Elasticity of Demand:

Price elasticity of demand is defined as the alertness of the consumer to change the quantity demanded when the market price of the good changes. Mathematically, it is measured by percentage change in quantity demanded with percentage change in price.

Answer and Explanation:

Price Elasticity of Demand= (Percentage change in Quantity Demanded)/ (Percentage change in Price)

1= (Percentage change in Quantity Demanded)/20

Percentage change in Quantity Demanded= 20

Therefore, the percentage change in quantity demanded= 20%


Learn more about this topic:

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Price Elasticity of Demand: Definition, Formula & Example

from Intro to Business: Help and Review

Chapter 3 / Lesson 54
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