Home › CA Foundation › Business Economics › Elasticity of Demand › Price elasticity of demand is defined as the per…
Price elasticity of demand is defined as the percentage change in quantity demanded divided by which of the following?
AThe percentage change in supply
BThe percentage change in income
CThe percentage change in advertising
DThe percentage change in price
Answer & Solution
Correct answer: D. The percentage change in price
1. Price elasticity measures responsiveness of quantity demanded to a change in the good's own price.
2. The formula is Ep = (% change in quantity demanded) / (% change in price).
3. Income would give income elasticity, advertising gives advertising elasticity.
4. So the denominator here is the percentage change in price.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.17_
Related questions
Using the Point method on a straight-line demand curve AB, elasticity at point P is given Under the Total Outlay method, demand is said to be unitary elastic when:Which of the following is NOT one of the four methods of measuring elasticity of demand liCross elasticity of demand (Ec) measures:Income elasticity of demand (Ey) is defined as:If proportionate change in demand equals proportionate change in price, the demand is:If a small change in price produces a much larger proportionate change in demand, the demaIf the price of a good changes and demand does not change at all, the price elasticity of