{"id":241043,"date":"2025-07-03T14:26:36","date_gmt":"2025-07-03T14:26:36","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=241043"},"modified":"2025-07-03T14:26:37","modified_gmt":"2025-07-03T14:26:37","slug":"if-the-price-elasticity-of-demand-for-a-product-is-equal-to-1-5","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/07\/03\/if-the-price-elasticity-of-demand-for-a-product-is-equal-to-1-5\/","title":{"rendered":"If the price elasticity of demand for a product is equal to 1.5"},"content":{"rendered":"\n

If the price elasticity of demand for a product is equal to 1.5, then a 10% decrease in price will:<\/p>\n\n\n\n

The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n

The correct answer is: increase the quantity demanded by 15%<\/strong>.<\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

Price elasticity of demand (PED) measures how sensitive the quantity demanded of a good is to changes in its price. It is calculated using the formula: PED=% change in quantity demanded% change in pricePED = \\frac{\\% \\text{ change in quantity demanded}}{\\% \\text{ change in price}}<\/p>\n\n\n\n

In this case, the price elasticity of demand is given as 1.5<\/strong>, which means the demand for the product is elastic<\/strong>. When demand is elastic, the percentage change in quantity demanded is greater than the percentage change in price.<\/p>\n\n\n\n

Let\u2019s break it down:<\/p>\n\n\n\n

    \n
  • Price elasticity of demand (PED) = 1.5<\/strong> implies that for every 1% change in price, the quantity demanded will change by 1.5%.<\/li>\n\n\n\n
  • A 10% decrease<\/strong> in price means the price has fallen by 10%, so we need to calculate the percentage change in quantity demanded. Using the formula, we have:<\/li>\n<\/ul>\n\n\n\n

    % change in quantity demanded=PED\u00d7% change in price\\% \\text{ change in quantity demanded} = PED \\times \\% \\text{ change in price} % change in quantity demanded=1.5\u00d7(\u221210%)\\% \\text{ change in quantity demanded} = 1.5 \\times (-10\\%)<\/p>\n\n\n\n

    This gives us a 15% increase<\/strong> in the quantity demanded because the negative sign for price change indicates a decrease in price, and the demand increases.<\/p>\n\n\n\n

    Therefore, when the price decreases by 10%, the quantity demanded will increase by 15%<\/strong>. This is typical for products with elastic demand because consumers are more responsive to price reductions. If the demand were inelastic (i.e., PED < 1), the quantity demanded would not increase as much. If the demand were unitary elastic (i.e., PED = 1), the quantity demanded would increase by exactly 10%, matching the price decrease.<\/p>\n\n\n\n

    Elastic demand suggests that the product is considered a luxury<\/strong> or has close substitutes<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

    If the price elasticity of demand for a product is equal to 1.5, then a 10% decrease in price will: The correct answer and explanation is: The correct answer is: increase the quantity demanded by 15%. Explanation: Price elasticity of demand (PED) measures how sensitive the quantity demanded of a good is to changes in […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-241043","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/241043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=241043"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/241043\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=241043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=241043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=241043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}