Question

the price of a product increases by 20%, leading to the quantity demanded decreasing by 60%. . what is price elasticity of demand for this product?

Answer 1

Price elasticity of demand (PED) = (% change in Q demanded)/(% change in price)
Price elasticity of demand (PED) = (-60%)/(20%)= -3.
PED = |3| > 1. The demand is elastic, because change in price causes bigger percentage change in the quantity demanded.