The price elasticity of demand is defined as

Question

BlackTom AI · Accepted Answer

To begin, let's lay out the question in focus: what is the price elasticity of demand defined as?
Option A: 'the percentage change in income divided by the percentage change in the quantity demanded.' This is incorrect because elasticity of demand with respect to price uses price, not income, in the denominator. It would mix income elasticity concepts with price changes, which is not how the metric is defined.
Option B: 'the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good.' This matches the textbook definition: elasticity of demand with respect to price equals the percentage change in quantity demanded divided by the percentage change in price. It measures how responsive quantity demanded is to changes in price.
Option C: 'the percentage change in the quantity demanded divided by the percentage change in income.' This resembles income elasticity of demand, not price elasticity. It would capture how demand responds to income changes, which is a different concept entirely.
Option D: 'none of these answers.' This would be appropriate only if none of the options matched the standard definition, but option B does match, so this is inaccurate.
Option E: 'the percentage change in price of a good divided by the percentage change in the quantity demanded of that good.' This is the inverse of the correct definition; it would represent something like the reciprocal of elasticity and does not reflect how quantity responds to price changes. It could lead to confusion or misinterpretation of responsiveness.
In terms of common misconceptions, beware that people sometimes confuse elasticity with merely noting that price and quantity move oppositely; however, the formal definition uses percentage changes in both variables, with the quantity change in the numerator and price change in the denominator.
Additionally, always ensure that the base for percentage changes is the initial or reference period values, as elasticity is a ratio of proportional changes and does not depend on absolute levels, assuming small percentage changes and ceteris paribus conditions.
Summarizing the distinctions: Option B correctly identifies the price elasticity of demand as the ratio of the percentage change in quantity demanded to the percentage change in price; Options A, C, and E mix in income or invert the ratio; Option D would only be correct if none of the provided statements fit, which is not the case here.

252_EC201 2025 Spring Quiz 2 Tuesday Group

The price elasticity of demand is defined as

View Explanation

Log in for full answers

Similar Questions

If a company needs to raise the prices of some its products, it should choose to raise the prices of Blank ______ products because relatively fewer customers will stop buying the product as a result.

Calculate the price elasticity of demand for a change in price from $10.00 to $15.00. Price Quantity $10.00 20 $15.00 15

For substitutes, the cross-price elasticity is _, the own price elasticity is _.

If the price elasticity of demand coefficient is (-)1, total revenue will remain constant when price rises or price falls.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

252_EC201 2025 Spring Quiz 2 Tuesday Group

The price elasticity of demand is defined as

View Explanation

Log in for full answers

Similar Questions

If a company needs to raise the prices of some its products, it should choose to raise the prices of Blank ______ products because relatively fewer customers will stop buying the product as a result.

Calculate the price elasticity of demand for a change in price from $10.00 to $15.00. Price Quantity $10.00 20 $15.00 15

For substitutes, the cross-price elasticity is ___, the own price elasticity is ___.

If the price elasticity of demand coefficient is (-)1, total revenue will remain constant when price rises or price falls.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

For substitutes, the cross-price elasticity is _, the own price elasticity is _.