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AP Microeconomics

Category - Microeconomics

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What is the correct formula for determining the price elasticity of demand?

Divide the percentage change in price by the percentage change in quantity demanded
Divide the unit elasticity by the percentage change in price
Divide the percentage change in quantity demanded by the percentage change in price
Subtract the change in price from the change in quantity demanded

Explanation

Answer - C - The correct formula for determining the price elasticity of demand is to divide the percentage change in quantity demanded by the percentage change in price.

Key Takeaway: According to the basic law of demand, the quantity of goods or services that are demanded falls when prices rise. We use the price elasticity of demand tells us how much the quantity demanded changes, measuring exactly how much demand changes in regard to the price.

To get the price elasticity of demand, simply divide the percentage change in quantity demanded by the percentage change in price.

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