Choice "C" is correct. The elasticity of demand is calculated as:
% change in demand% change in price |
If the elasticity of demand is 1.5 (assumed to be the absolute value, as the elasticity of demand for a normal good is always negative), then a 10% price reduction would cause an increase in the quantity demanded by 15% (a ratio of 15 to 10 or 1.5).Choices "b", "a", and "d" are incorrect, per explanation above.
