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Answer :
Final answer:
The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. For a 3% price increase causing a 1.7% fall in demand, the price elasticity of demand is 0.56. This indicates an inelastic demand.
Explanation:
To calculate price elasticity of demand, you divide the percentage change in quantity demanded by the percentage change in price. Here the content loaded a 3 percent increase in price causes the quantity demand to fall by 1.7 percent, so we can use these values to calculate the price elasticity of demand.
The formula becomes:
Price Elasticity of Demand = (Percentage change in Quantity Demanded) / (Percentage Change in Price)
= (-1.7) / 3
= -0.56
The value of price elasticity of demand in this case is negative, paralleling the law of demand which states that as price increases, quantity demanded decreases. We take the absolute value in this case so the price elasticity of demand is 0.56.
This indicates that the demand is inelastic, as its elasticity value is less than one.
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