If the price doubles and causes consumers to cut in half the amount bought, the demand is?

If the price doubles and causes consumers to cut in half the amount bought, the demand is?

• A. Elastic
• B. Inelastic
• C. Unit elastic
• D. Perfectly elastic

Answer: (A)

Price elasticity of demand measures how much buyers change the quantity they buy in response to a price change. Here, price doubles, a 100% increase, while quantity demanded falls by 50%. Elasticity is the percentage change in quantity demanded divided by the percentage change in price: 50% / 100% = 0.5 (the sign is negative because price and quantity move in opposite directions). An elasticity with magnitude less than 1 means inelastic demand, so the demand is inelastic.

Price elasticity of demand measures how much buyers change the quantity they buy in response to a price change. Here, price doubles, a 100% increase, while quantity demanded falls by 50%. Elasticity is the percentage change in quantity demanded divided by the percentage change in price: 50% / 100% = 0.5 (the sign is negative because price and quantity move in opposite directions). An elasticity with magnitude less than 1 means inelastic demand, so the demand is inelastic.