Question

Which statement is the best definition of the price elasticity of demand?The ratio of the percent change in demand to the percent change in income.The ratio of the percent change in price to the percent change in quantity demanded.The absolute value of the slope of the demand curve.The ratio of the percent change in quantity demanded to the percent change in price.

Answer 1

Answer:

The correct answer is letter "D": The ratio of the percent change in quantity demanded to the percent change in price.

Explanation:

Price Elasticity of Demand is a measure of the response of one factor to a change in another variable. It can explain the degree to which supply and demand change with the price of goods or consumer income for a good or service. We calculate elasticity by dividing the change in quantity demanded with the change in price. A result greater than or equal to 1 means a good or service is elastic; less than 1 means an inelastic good or service.

Answer 2

Answer:

The ratio of the percent change in quantity demanded to the percent change in price.

Explanation:

Price elasticity of demand measures how responsive quantity demand is to changes in price.

The formula is given by

Price elasticity of demand= Percetage change in demand/ Percentage change in price

Usually the price elasticity bis negative. Goods that don't obey the law of demand have positive elasticity.