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Postby prateekbande » Wed Aug 29, 2012 8:20 pm

If the price elasticity of demand is 1.5 and a change in the price of the product increases the quantity demanded by 4%, then what is the percent change in price?

A) +2.667%.
B) –0.375%.
C) −2.667%.
the ans was c why not a.


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Re: microeconomics

Postby akshat » Fri Aug 31, 2012 11:15 am

Because the increase in price would lead to decrease in quantity demanded and decrease in price leads to increase in quantity demanded! Thus, the direction of change in these two are opposite to each other and hence the negative sign.

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