The price elasticity of demand measures the consumers' sensitivity to a price change. the producers' sensitivity to a price change. how much the market price changes in response to a change in demand. how much the demand changes in response to a change in income.

Question

Business

Koen Shields

15 August, 16:00

The price elasticity of demand measures the consumers' sensitivity to a price change. the producers' sensitivity to a price change. how much the market price changes in response to a change in demand. how much the demand changes in response to a change in income.

+2

Answers (1)

Know the Answer?

Giancarlo Vaughan · Answer 1

The consumers' sensitivity to a price change.

Explanation:

The price elasticity of demand is a measure of the change in the quantity demanded by customers for a product, relative to change in price. It is computed using the following formula:

Price Elasticity of Demand = %change in quantity demanded/%change in price

If the quantity demanded for a good rises or falls proportionally more than the change in price, the good is classified as elastic. For example, if the price of salt rises by 15%, and the quantity demanded falls by 20%, then salt is an elastic good.

If the quantity demanded for a good rises or falls proportionally less than the change in price, the good is classified as inelastic. For example, if the price of gasoline rises by 30%, but the quantity demanded only falls by 10% (as it's often the case in reality), then gasoline is an inelastic good.