Economists compute the price elasticity of demand as the
A)percentage change in price divided by the percentage change in quantity demanded.
B)change in quantity demanded divided by the change in the price.
C)percentage change in quantity demanded divided by the percentage change in price.
D)percentage change in quantity demanded divided by the percentage change in income.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. This formula helps to measure the responsiveness of quantity demanded to a change in price, and whether it is elastic (responsive to changes) or inelastic (not very responsive to changes). Choice A is incorrect because the percentage change in price must be on the bottom of the equation, not the top. Choice B is incorrect because it calculates the slope of the demand curve, not the responsiveness of quantity demanded to a change in price. Choice D is incorrect because it measures the income elasticity of demand, which is a different concept altogether.

Economists Compute the Price Elasticity of Demand as the