Questions: If the price of oil goes up by 50% and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is 0.75 . 0.50 . 0.25 . 1.00 .

The answer is 0.50.

To determine the price elasticity of demand, we use the formula:

\[ \text{Price Elasticity of Demand (PED)} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}} \]

Given:

• The price of oil increases by 50%, so the percentage change in price is \( +50\% \).
• The quantity demanded decreases by 25%, so the percentage change in quantity demanded is \( -25\% \).

Now, plug these values into the formula:

\[ \text{PED} = \frac{-25\%}{+50\%} = -0.50 \]

The absolute value of the price elasticity of demand is:

\[ |\text{PED}| = |-0.50| = 0.50 \]

Therefore, the correct answer is 0.50.

• 0.75: This would imply that the quantity demanded decreases by 37.5% when the price increases by 50%, which is not the case here.
• 0.25: This would imply that the quantity demanded decreases by 12.5% when the price increases by 50%, which is not the case here.
• 1.00: This would imply that the quantity demanded decreases by 50% when the price increases by 50%, which is not the case here.