With the price elasticity of demand at 3, if the price changes 1%, the demand quantity will change 3%.
Price elasticity of demand is a measure how sensitive the demand changes as the price changes.
Price elasticity of demand is calculated as:
Price elasticity = % change of demand quantity / % change of price
Parameters given in the problem:
Price elasticity of demand = 3
% change of price = 1%
Plug these parameters into the formula:
3 = % change of demand quantity / 1
% change of demand quantity = 3 x 1 = 3
Therefore, the demand quantity will change 3%
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