Answer to Question #78387 in Macroeconomics for emma
the price of a product increases by 20%, leading to the quantity demanded decreasing by 60%. . what is price elasticity of demand for this product?
Price elasticity of demand (PED) = (% change in Q demanded)/(% change in price) Price elasticity of demand (PED) = (-60%)/(20%)= -3. PED = |3| > 1. The demand is elastic, because change in price causes bigger percentage change in the quantity demanded.