If the price of a good goes up by 20 percent and the quantity demanded falls by 40 percent, the price elasticity of demand is 2.
Answer the following statement true (T) or false (F)
True
Elasticity of demand = % change in quantity/% change in price = 40/20 = 2. We conventionally give elasticity of demand as a positive number, which is why we used the absolute values of the numerator and denominator in the above equation (we have taken 40 percent instead of ?40 percent).
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