If an economist wants to measure the magnitude of a percentage change in quantity to changes in a good's price, what is the appropriate way to do that?

Choose 1 answer:
(A) A market model
(B) Game theory
(C) Income elasticity of demand
(D) A production possibilities curve (PPC)
(E) Price elasticity of demand

Question

If an economist wants to measure the magnitude of a percentage change in quantity to changes in a good's price, what is the appropriate way to do that?

Choose 1 answer:
(A) A market model
(B) Game theory
(C) Income elasticity of demand
(D) A production possibilities curve (PPC)
(E) Price elasticity of demand

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Price Elasticity of Demand: Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated using the formula: $PED = \frac{\% \Delta Q_d}{\% \Delta P}$, where $\% \Delta Q_d$ is the percentage change in quantity demanded and $\% \Delta P$ is the percentage change in price. ‖ ‖ b ⋮ Application: To measure the magnitude of a percentage change in quantity to changes in a good's price, economists use the concept of price elasticity of demand. This helps in understanding how sensitive the demand for a good is to price changes. ‖ ∻Answer∻ ⚹ (E) Price elasticity of demand ⚹ ∻Key Concept∻ ⚹ Price elasticity of demand ⚹ ∻Explanation∻ ⚹ Price elasticity of demand is the appropriate measure for determining the magnitude of a percentage change in quantity in response to changes in a good's price. It quantifies the sensitivity of demand to price changes. ⚹◊What is the formula for calculating price elasticity of demand in Microeconomics?⍭ Generate me a similar question◊

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