Price Elasticity of Demand Is the Ratio of the

question 84

Multiple Choice

Price elasticity of demand is the ratio of the

• A)absolute change in quantity demanded to the absolute change in price.
• B)absolute change in price to the absolute change in quantity demanded.
• C)percentage change in quantity demanded to the percentage change in price.
• D)percentage change in price to the percentage change in quantity demanded.

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Definitions:

Purely Competitive

A market structure characterized by a large number of small firms, free entry and exit, homogeneity of products, and perfect information that leads to the price being dictated by the market.

Monopolistic Firms

Firms operating in a market structure with many competitors that sell differentiated products.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the goods' sensitivity to price changes.

Demand Schedule

A table that shows the quantity of a good or service that consumers are willing and able to buy at various prices.