Why Do Economists Measure Responsiveness of Demand to Price in Percentage

question 208

Essay

Why do economists measure responsiveness of demand to price in percentage changes rather than in absolute changes?

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Definitions:

Fixed Cost

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance, remaining constant regardless of production volume.

Fixed Inputs

Resources used in production that don't change in quantity as the level of production increases or decreases.

Cost of Capital

The cost of capital represents the return rate that investors expect of a company to generate from its projects to be worth the risk of the investment.

Accountants

Professionals who manage and examine financial records for individuals, companies, or organizations.