QUESTION 9 10 points If the elasticity of demand for spring

QUESTION 9 10 points If the elasticity of demand for spring break packages to Cancun is -5 and if you notice that this year in Cancun the quantity of packages demanded increased by 10% then what happened to the price of Cancun vacation packages? A. The price fell by 10% B. The price fell by 2% C. The price rose by 10% 0 D. The price rose by 2%

Solution

Elasticity of demand = % change in Q / % change in P

-5 = 10% / P

P = 10/5

= 2 %

Hence, price decreases by 2 %.

Right answer is : (B)