Question

How is the price elasticity of demand measured?

1) As the percentage change in quantity demanded divided by the percentage change in price
2) As the percentage change in price divided by the percentage change in quantity demanded
3) As the total revenue divided by the quantity demanded
4) As the price multiplied by the quantity demanded

Answer 1

The price elasticity of demand is measured by dividing the percentage change in quantity demanded by the percentage change in price.

Step-by-step explanation:

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. This measurement helps determine the responsiveness of demand to price changes.

For example, if the price of a product increases by 10% and the quantity demanded decreases by 5%, the price elasticity of demand would be -0.5. This indicates that demand is inelastic, meaning that the change in price has a smaller impact on the quantity demanded.

In summary, the price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.