Asksia AI LOGO

Sia

Question
Microeconomics
Posted 2 months ago

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
Sign in to unlock the answer
Answer from Sia
Posted 2 months ago
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=%ΔQd%ΔPPED = \frac{\% \Delta Q_d}{\% \Delta P}, where %ΔQd\% \Delta Q_d is the percentage change in quantity demanded and %ΔP\% \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.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Upgrade to Asksia Pro

Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.

Unlimited chat query usages
Strong algorithms that better know you
Early access to new release features
Study Other Question