A firm increases its price from $8 to $10 and sees demand for the product fall by 25%. What would the price elasticity of demand be for this product?
a. 0.75
b. 1
c. - 1
d. -1.25
e. 1.25
Price increased by 20 %
Quantity decreased by 25 %
Price elasticity of demand = % Change in Quantity / % Change in Price = - 25 / 20 = - 1.25
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