There are two methods of calculating elasticities. One calculates the ratio of the percentage changes in quantity and price, and the other calculates the average percentage changes in quantity and price. We use the second method because it
A) involves an additional calculation
B) is not sensitive to direction of movement
C) is sensitive to direction of movement
D) is never wrong
E) always has the same sign

Question

Quizplus · Accepted Answer

The second method, which calculates the average percentage changes in quantity and price, is preferred because it is not sensitive to the direction of movement. This means it provides a consistent measure of elasticity regardless of whether the price is increasing or decreasing.

There Are Two Methods of Calculating Elasticities