Price elasticity of demand is defined as
A)the percentage change in price divided by the percentage change in quantity demanded
B)the percentage change in quantity demanded divided by the percentage change in price
C)the change in quantity demanded divided by the change in price
D)the change in price divided by the change in quantity demanded
E)the quantity demanded divided by the price

Question

Quizplus · Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. This is because it measures the responsiveness of demand to changes in price, and dividing the percentage change in quantity demanded by the percentage change in price helps to standardize the measurement across different price ranges and products. Choice A is the reverse of this formula and therefore incorrect. Choice C is similar to the correct formula but does not standardize the measurement to ensure comparability. Choice D is the reverse of the correct formula and therefore incorrect. Choice E is also incorrect as it does not consider the changes in both price and quantity demanded.

Price Elasticity of Demand Is Defined as