The price elasticity of demand for gas will be 0.2
According to the law of demand, the quantity demanded of a product falls with an increase in its price and vice versa. The percentage of the quantity of demand because of the stated increase in the price is measured using the price elasticity of demand.
In the given question, the quantity of demand decreases by 5%, and the prices increase by 25%. To calculate the price elasticity of demand, we have the formula:
=> [tex]E_{d} = \frac{Percentage of change in quantity of demand}{Percentage of change in price}[/tex]
=> [tex]E_{d} = \frac{5}{25}[/tex]
=> [tex]E_{d} = 0.2[/tex]
Hence, we get the price elasticity of demand for gas as 0.2
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