A value of the absolute price elasticity of demand equal to 0.5 indicates that
A) a 0.5% decrease in price leads to a 1% increase in quantity demanded.
B) a 2% decrease in price leads to a 25% increase in quantity demanded.
C) a 1% increase in price leads to a 5% decrease in quantity demanded.
D) a 10% increase in price leads to a 5% decrease in quantity demanded.
Answer: D
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Indy has a price elasticity of demand for beer of 1.00. Suppose the price of each beer is increased by 10 percent. What will happen to the total amount Indy spends on beer?
A. It will decrease 10 percent. B. It will not change. C. It will increase 10 percent. D. It is impossible to tell.
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An absolute price elasticity of demand equal to 2 indicates that a
A. 1 percent increase in price leads to a 2 percent decrease in quantity demanded. B. 10 percent decrease in price leads to a 2 percent increase in quantity demanded. C. 2 percent increase in price leads to a 10 percent decrease in quantity demanded. D. 0.2 percent decrease in price leads to a 1 percent increase in quantity demanded.