Final answer:
The correct formula to calculate % change in P given η (price elasticity of demand) is % change in P = 1 / η. By rearranging the equation η = % change in Q / % change in P, we solve for % change in P, which results in the formula under option a).
Step-by-step explanation:
The question refers to a concept in economics known as price elasticity of demand. This is a measure of how much the quantity demanded of a good responds to a change in its price. In the given equation η = % change in Q / % change in P, η represents the elasticity. To find the formula to calculate the % change in P (price), you rearrange this equation to solve for % change in P.
We begin with the original equation: η = % change in Q / % change in P.
To isolate % change in P, you multiply both sides by % change in P and then divide both sides by η, yielding:
- % change in P η = % change in Q
- % change in P = % change in Q / η
If we express % change in Q as 1 (since we are looking for the % change in P as a formula), we have:
Therefore, the correct formula to calculate % change in P given η is % change in P = 1 / η, which corresponds to option a).