Question

The price elasticity of demand is:

a) the ratio of the percentage change in quantity demanded to the percentage change in price.
b) the responsiveness of revenue to a change in quantity.
c) the ratio of the change in quantity demanded divided by the change in price.
d) the response of revenue to a change in price.

Answer 1

a) the ratio of the percentage change in quantity demanded to the percentage change in price.

Step-by-step explanation:

The formula of the price elasticity of demand is shown below:

= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of quantity demanded)

Change in quantity demanded would be

= Q2 - Q1

And, average of quantity demanded would be

= (Q1 + Q2) ÷ 2

Change in price would be

= P2 - P1

And, average of price would be

= ($P1 + P2) ÷ 2