If the elasticity of demand for a microwave oven is 1.5, this means A. few substitutes exist

B. a 1% decrease in price will lead to a 15% increase in quantity demanded

C. a 5% decrease in price will lead to a 7.5% increase in quantity demanded

D. a 10% increase in price will lead to a 150% decrease in quantity demanded

Can anyone explain to me how to answer this question? Thanks!

An elasticity of demand that is 1.5 means that C. a 5% decrease in price will lead to a 7.5% increase in quantity demanded.

It also means that the price elasticity of demand is positive. A decrease in price by 5% affects the quantity demanded by more than 1.

Data and Calculations:

The elasticity of demand = Percentage Change in Quantity Demanded/Percentage Change in Price

This price elasticity of demand can be represented by these symbol, QΔ%/PΔ%.

Where:

Δ% = Percentage Change  

Q = Quantity demanded  

P = Price of the good

For instance, with Option C, the 7.5% increase in the quantity demanded and a 5% decrease in price will demonstrate the price elasticity of demand to be as follows:

= 1.5 (7.5%/5%)

Thus, the elasticity of demand that is 1.5 means Option C.

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C. a 5% decrease in price will lead to a 7.5% increase in quantity demanded

Explanation:

We find the answer by usin the price elasticity of demand formula

Price elasticity = %change in quantity demanded/% in price

Now, we plug the correct amounts into the formula

1.5 = 7.5% / 5 %

So we can see that the correct answer is C because the division of 7.5 by 5, gives us a result of 1.5.

An elasticity of 1.5 means that the good is relatively elastic: this means that the quantity demanded will change more than the price. We can see that this is true for this example: the quantity demanded changed by 7.5%, while the price changed by 5%.

in this scenario it would be the consumer demand as most influential in making the decision. the band members need to figure out where and from whom they will make the most money, in other words who out of the two consumer groups - football fans or car drivers - will spend their money, who is more likely to contribute to their cause and buy what they are offering.