Business Studies Multiple Choice Question – 26 January 2022

If the price elasticity of demand for clothing is estimated to be – 2.0, a 20% fall in the price of clothing will lead to a?

Select ONE answer:

1. 20% increase in quantity demanded
2. 20% decrease in quantity demanded
3. 40% increase in quantity demanded
4. 40% decrease in quantity demanded

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – formula ==> % change in quantity demanded / % change in price = PED e.g. measures the responsiveness of demand for a good or service to a change in its price ==> 40 / -20 = – 2.0
4. Not correct

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