Wrong! - Total expenditure equals the quantity purchased multiplied by the price, so the change in total expenditure equals the change in the quantity purchased plus the change in the price. Total expenditure on pet products increased 11 percent when the price rose by 15 percent. By how much did the quantity purchased change? How do you use this information to find the price elasticity of demand?
Correct! - Total expenditure equals the quantity purchased multiplied by the price, so the change in total expenditure equals the change in the quantity purchased plus the change in the price. Total expenditure on pet products increased 11 percent when the price rose by 15 percent, so the quantity purchased decreased by 4 percent. The price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price, which is 4 percent/15 percent = 0.27
