Assume that for the average consumer, the quantity demanded for jeans increases from 5 to 7 pairs per year in response to a price decrease from $ 29 to $ 24 per pair. The price elasticity and relative elasticity of demand for jeans is best described by which of the followingPrice elasticity of demand Relative elasticity （） ①A. -1.77 Relatively inelastic ②B. -2.32 Relatively elastic ③C. -1.77 Relatively elastic
A. ①
B. ②
C. ③
参考答案：C
解析：
The percentage change in quantity demanded is (7-5)/[(7+5)/2]=33.33 % and the percentage change in price is (24-29)/[(24+29)/2]=-18.87%. Thus, price elasticity =33.33%/(-18.87%)=-1.77. A good is considered to be elastic if the absolute value of price elasticity is greater than 1. In this case, the absolute value of the price elasticity of demand for jeans is 1.77, so the price elasticity for jeans is relatively elastic.