Suppose that along a given demand curve, price goes up by 10%, decreasing quantity demanded by 5%. The price elasticity of demand is:
impossible to calculate without specific prices and quantities.
–2.
–1/2.
The price elasticity of demand (PED) can be calculated using the formula:
[ \text{Price Elasticity of Demand} = \frac{%\text{ Change in Quantity Demanded}}{%\text{ Change in Price}} ]
In this case, the price increases by 10%, which is a positive change, and the quantity demanded decreases by 5%, which is a negative change. Therefore, we can plug in the values:
[ \text{Price Elasticity of Demand} = \frac{-5%}{10%} = -0.5 ]
Thus, the price elasticity of demand is (-1/2).
So the correct answer is:
–1/2.