The elasticity of a good is $E = 0.7$. What is the effect on the quantity demanded of: (a) A 3% price increase? The quantity demanded will decrease by about !%. (b) A 3% price decrease? The quantity demanded will increase by about !%.
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For a usual downward-sloping demand, the sign of %ΔQ is opposite the sign of %ΔP; with elasticity magnitude 0.7 we take %ΔQ = -0.7 × %ΔP. Show more…
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