For the cabbage example, the percent change in price is approximately -9.5 percent and the percent change in quantity demanded is approximately +12.8 percent. The elasticity is closest to:

For the cabbage example, the percent change in price is approximately -9.5 percent and the percent change in quantity demanded is approximately +12.8 percent. The elasticity is closest to:

• A. 1.95
• B. 0.80
• C. 1.34
• D. 0.60

Answer: (C)

Price elasticity of demand measures how much buyers respond to a price change by changing the quantity they buy. To find it, divide the percentage change in quantity demanded by the percentage change in price. Here, quantity demanded rises by 12.8% while price falls by 9.5%, so elasticity = 12.8% / (-9.5%) ≈ -1.35. The magnitude is about 1.34, which means demand is elastic: a price drop of about 9.5% leads to a more than proportional increase in quantity demanded. The negative sign reflects the inverse relationship, but the size of the response is about 1.34.

Price elasticity of demand measures how much buyers respond to a price change by changing the quantity they buy. To find it, divide the percentage change in quantity demanded by the percentage change in price. Here, quantity demanded rises by 12.8% while price falls by 9.5%, so elasticity = 12.8% / (-9.5%) ≈ -1.35. The magnitude is about 1.34, which means demand is elastic: a price drop of about 9.5% leads to a more than proportional increase in quantity demanded. The negative sign reflects the inverse relationship, but the size of the response is about 1.34.