Given:
Elasticity of Demand = 2.7
Increase in price = 3%
To find:
Change in quantity demanded
Solution:
The percentage change in quantity demanded is the mathematical product of the percentage change in price and elasticity of demand. This can be mathematically represented as,
[tex]\%\text{ change in quantity demanded }=\%\text{ change in price} \times\text{ Elasticity of demand}[/tex]
[tex]\Rightarrow \%\text{ change in quantity demanded }=3 \times 2.7 \rightarrow 8.1 \%[/tex]
Since, there is an increase in price, the demand for the product will decrease. Therefore, we can conclude that there will be 8.1% decrease in quantity demanded.
