suppose the price elasticity of demand for basketballs is 12

Solution

The demand for a product gets influenced by its own price, income of the consumer and the availability of related goods. Note that price elasticity of demand articulates us the percentage change in quantity demanded for each 1 percent change in its own price.

ed = % change in QD/% change in price

-1.2 = % change in QD/1%

Hence 1% increase in price will reduce the quantity demanded for basketballs by 1.2%