Question

Suppose the price elasticity of demand for Geisha soap is 4. What will be the effect on the quantity demanded for Geisha Soap if price rises by 8%?

Answer 1

Elasticity of demand =percentage change in quantity demanded /percentage change in price

Elasticity of demand=4

Percentage change in price = 8

4=percentage change in quantity demanded/8

percentage change in quantity demanded=4*8=32

So demand is decreased by 32%.