How do economists compute the price elasticity of demand
A)the percentage change in the price divided by the percentage change in quantity demanded
B)the percentage change in income divided by the percentage change in the quantity demanded
C)the percentage change in the quantity demanded divided by the percentage change in price
D)the percentage change in the quantity demanded divided by the percentage change in income

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 formula measures the responsiveness of demand for a product to a change in its price. A higher number indicates a greater sensitivity to price, while a lower number indicates a lower sensitivity to price. Option A and Option D are incorrect as they have swapped the numerator and denominator in the formula. Option B is incorrect as it refers to income elasticity of demand, which measures the responsiveness of demand for a product to a change in income.

How Do Economists Compute the Price Elasticity of Demand