The price elasticity of demand is the ?
Correct answer: B. ratio of the percentage change in quantity demanded to the percentage change in price.
- A. ratio of the change in price to the change in quantity demanded.
- B. ratio of the percentage change in quantity demanded to the percentage change in price.
- C. ratio of the change in quantity demanded to the change in price.
- D. ratio of the percentage change in price to the percentage change in quantity demanded.
Explanation
Price elasticity of demand measures responsiveness, so it is calculated as percentage change in quantity demanded divided by percentage change in price. Using percentage changes makes the measure independent of the units used.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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