Price elasticity of demand is measured using percentage changes. Why?
What will be an ideal response?
By using percentage changes, we are focusing on relative changes and not absolute changes. This means we don't have to worry about the units we use to measure either quantity or price. If someone buys 12 eggs a week at $1 a dozen and 8 eggs at 75 cents a dozen, we will get the same value for elasticity whether we use eggs, dozens of eggs, dollar, or cents as the measures. Percentage change is independent of the units chosen.
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If consumption is $800 when disposable income is $1,000 . the marginal propensity to consume (MPC) must be 0.80
a. True b. False Indicate whether the statement is true or false
Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic
a. in the short run but not in the long run. b. in the long run but not in the short run. c. both in the short run and in the long run. d. neither in the short run nor in the long run.