Final answer:
The incorrect statement is that a higher price elasticity of demand results in a steeper demand curve; actually, higher elasticity leads to a flatter demand curve, indicating greater price sensitivity.
Step-by-step explanation:
The statement about price elasticity of demand that is incorrect is "The higher the price elasticity of demand, the steeper the demand curve." In fact, it's the opposite: a higher price elasticity of demand indicates a flatter demand curve, showing that quantity demanded is more responsive to price changes. The correct concept is that the steeper the demand curve, the more inelastic the demand, meaning consumers are less sensitive to price changes.
Price elasticity of demand is indeed measured by the percentage change in quantity demanded divided by the percentage change in price and indicates how much quantity demanded will respond to a price change. A firmer's markup and profit margin can vary depending on whether demand is elastic or inelastic. When the demand is inelastic, there are usually fewer close substitutes available, and consumers are less responsive to price changes, allowing firms to maintain higher markups.