How is the price elasticity of demand calculated?
A) averaging previous demand levels with new demand levels
B) dividing percentage change in quantity demanded by percentage change in price
C) dividing the new quantity demanded by the percentage change in price times 100
D) multiplying the percentage change in quantity demanded by the percentage change in price
E) dividing the percentage change in price by the percentage change in quantity demanded

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. This gives a numerical value indicating the sensitivity of demand to changes in price. A value greater than 1 indicates elastic demand, meaning that quantity demanded changes proportionally more than price. A value less than 1 indicates inelastic demand, meaning that quantity demanded changes proportionally less than price. A value of exactly 1 indicates unit elasticity, meaning that quantity demanded changes proportionally with price.

How Is the Price Elasticity of Demand Calculated