Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
-20%
B
-10%
C
-5%
D
20%
Understanding the Answer
Let's break down why this is correct
Answer
When the price of a product increases by 10%, we can use the price elasticity of demand to understand how much the quantity demanded will change. Price elasticity of demand tells us how sensitive consumers are to price changes. In this case, the elasticity is -2, which means that for every 1% increase in price, the quantity demanded will decrease by 2%. So, if the price goes up by 10%, we multiply 10% by -2, which gives us a -20% change in quantity demanded. This means we can expect that the quantity demanded will decrease by 20% due to the price increase.
Detailed Explanation
When the price goes up by 10%, the quantity demanded goes down by 20%. Other options are incorrect because This answer suggests that demand changes the same amount as the price; This answer shows a misunderstanding of elasticity.
Key Concepts
Price elasticity of demand
Topic
Understanding Elasticity and Revenue
Difficulty
easy level question
Cognitive Level
understand
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