Price Elasticity of Demand Is Defined as the Ratio of The

question 257

Multiple Choice

Price elasticity of demand is defined as the ratio of the:

• A) percentage increase in price to an increase in quantity demanded.
• B) unit change in quantity demanded to the dollar change in price.
• C) maximum amount that consumers will pay to increase quantity.
• D) percentage change in quantity demanded to the percentage change in price, other things being equal.

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Definitions:

Short Run

A period in economics during which at least one input is fixed and cannot be changed by the firm.

Long Run

A period in which all factors of production and costs are variable and companies can enter or exit an industry.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various price levels at a given time.

Substitutes

Goods or services that can be used in place of each other; when the price of one goes up, the demand for the other can increase.