High School

If increasing the price of solar panels by 20% leads to a decrease in the quantity demanded by 10%, what is the absolute value of the price elasticity of demand for solar panels?

Answer :

If increasing the price of solar panels by 20% leads to a decrease in the quantity demanded by 10%, the absolute value of the price elasticity of demand for solar panels is 0.5.

The absolute value of the price elasticity of demand for solar panels can be calculated using the formula:Price Elasticity of Demand = Percentage change in quantity demanded / Percentage change in price

In this case, the price of solar panels is increased by 20%, which leads to a decrease in the quantity demanded by 10%. To calculate the absolute value of the price elasticity of demand, we need to find the percentage change in quantity demanded and the percentage change in price.

The percentage change in quantity demanded is calculated as the change in quantity demanded divided by the original quantity demanded, multiplied by 100. In this case, the quantity demanded decreases by 10%, so the percentage change in quantity demanded is -10%.

The percentage change in price is calculated as the change in price divided by the original price, multiplied by 100. In this case, the price increases by 20%, so the percentage change in price is 20%.

Now we can calculate the absolute value of the price elasticity of demand by dividing the percentage change in quantity demanded (-10%) by the percentage change in price (20%). The absolute value of the price elasticity of demand is 0.5.

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