Chapter 46, Problem 7MCQ

To determine

The variable used to determine the percentage change for quantity and the percentage change for the price using the mid-point method.

Answer to Problem 7MCQ

Option a is correct.

Explanation of Solution

Explanation for the correct option:

a.

Price elasticity of demand refers to the measure that is used to determine the effect of change in quantity demand with respect to the change in price. It can be computed by using the midpoint method formula as shown below:

  $\text{Price elasticity}=\frac{\left(\frac{\text{Change in quantity demanded}}{\text{Average quantity}}\right)}{\left(\frac{\text{Change in price}}{\text{Average price}}\right)}$

Therefore, option a is correct.

Explanation for incorrect options:

Since it is formula based, other options are incorrect.

Economics Concept Introduction

Price elasticity of demand: The relationship between the change in demand due to a price change is referred to as price elasticity of demand.