Question

One practical reason that economists use percentages to measure elasticity is:

a. that more complicated calculations tend to be more accurate

b. to convert elasticities to the dollar units

c. to convert units to the metric system

d. to be able to compare characteristics of unrelated products

Answer 1

d. to be able to compare characteristics of unrelated products.

Step-by-step explanation:

In economics elasticity is defined as the degree of responsiveness of demand or supply to changes in price. It is derived by dividing percentage change in quantity to percentage change in price.

Take for example elasticity of demand

Elasticity.of demand= percentage change in quantity demanded/percentage change in price

A practical reasons for using percentages to represent change is to better compare unrelated products.

Quantity is measured in a particular unit (packets), while price is measured in currency (dollar).

Comparing the two variable directly will not provide a true representation of their relationship.

So they are both converted to percentage change. This gives a common unit (Percetage) on which we can base comparism.