The quantity of new cars increases by 10 percent. If the price elasticity of demand for new cars is 1.25, the price of new cars will fall by _____.

[1 mark]

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10%

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2.5%

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12.5%

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Solution

The correct option is A 8%
Ed = Percentage change in quantity demanded Percentage change in price
1.25 = 10
Percentage change in price
Percentage change in price = 10
1.25
= 8%

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The quantity of new cars increases by 10 percent. If the price elasticity of demand for new cars is 1.25, the price of new cars will fall by _____. [1 mark]

The correct option is A 8%Ed = Percentage change in quantity demanded Percentage change in price 1.25 = 10 Percentage change in price Percentage change in price = 10 1.25 = 8%

The quantity of new cars increases by 10 percent. If the price elasticity of demand for new cars is 1.25, the price of new cars will fall by _____.

[1 mark]

The correct option is A 8%
Ed = Percentage change in quantity demanded Percentage change in price
1.25 = 10
Percentage change in price
Percentage change in price = 10
1.25
= 8%