A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q₁, P₁ and point Q₂, P₂ is A)[(P₂ − P₁)/(P₂ + P₁)]/[(Q₂ − Q₁)/(Q₂ + Q₁)]. B)[(P₂ − P₁)/P₁]/[(Q₂ − Q₁)/Q₁]. C)[(Q₂ − Q₁)/(Q₂ + Q₁)]/[(P₂ − P₁)/(P₂ + P₁)]. D)[(Q₂ − Q₁)/Q₂)]/[(P₂ − P₁)/P₂].

Question

Quizplus · Accepted Answer

The correct formula for elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Therefore, option C is the correct formula as it has the percentage change in quantity demanded in the numerator and the percentage change in price in the denominator. Option A and B do not have the correct setup for the formula, while option D is incorrect as it only uses the change in quantity demanded and price, without accounting for their initial values.

A Correct Formula (Dropping All Minus Signs) for the Calculation