SOLUTION: 4. Given a 15% increase in a good's price and a 25% decrease in quanitity demanded for the good by a consumer, which of the following types of elasticity best describes the demand

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Question 657971: 4. Given a 15% increase in a good's price and a 25% decrease in quanitity demanded for the good by a consumer, which of the following types of elasticity best describes the demand curve for the consumer?
a.Constant-elasticity
b. Unit Elastic
c. Elastic
d. Inelastic
Any help is appreciated..Thank you!
Answer by lostin(9) About Me  (Show Source):
You can put this solution on YOUR website!
Elasticity of demand curve is (DQ/Q)/(DP/P)
Q is demand and P is price of good.
In our case E = (-0.25)/(0.15) = -1.66
- sign is for decrease in sale.
For this values of demand curve we say elastic or relative elastic. Now in given data we have only one point with us and cannot comment whether this elasticity is constant or not. But Based on available data we can only say that demand curve is elastic. ( To say constant or not, you need to have at least 2 points, As far as I understand)
http://en.wikipedia.org/wiki/Price_elasticity_of_demand
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