The elasticity of red wine is estimated to be3 If there is a

The elasticity of red wine is estimated to be-3. If there is a 20% increase in the price af red wine, by how much does demand change? 50% increase O 10% increase 40% decrease 10% decrease

Solution

Elasticity is equals to percentage change in quantity to percentage change in price

-0.5= % change in Quantity/ 20%

%change in Quantity = 10%

If prices increase quantity demanded should decrease hence it will decrease by 10%

Option D ia correct