The price elasticity of demand for eggs
A) is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs.
B) will be lower if there is a new invention that is a close substitute for eggs.
C) will be higher if consumers consider eggs to be a necessity.
D) All of the above are correct.

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. Option A correctly summarizes this calculation.

Option B is incorrect because the availability of close substitutes for eggs does not affect the formula used to calculate the price elasticity of demand for eggs. However, it may affect the value of the price elasticity of demand, with a higher value indicating that consumers are more responsive to price changes.

Option C is also incorrect because the perceived necessity of a good does not affect the formula used to calculate the price elasticity of demand. However, it may affect the value of the price elasticity of demand, with a lower value indicating that consumers are less responsive to price changes.

The Price Elasticity of Demand for Eggs