A Correct Formula (Dropping All Minus Signs)for the Calculation of the Elasticity

question 144

Multiple Choice

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q₁,P₁ and point Q₂,P₂ is

• A)[(P₂ - P₁)/(P₂ + P₁)]/[(Q₂ - Q₁)/(Q₂ + Q₁)].
• B)[(P₂ - P₁)/P₁]/[(Q₂ - Q₁)/Q₁].
• C)[(Q₂ - Q₁)/(Q₂ + Q₁)]/[(P₂ -P₁)/(P₂ + P₁)].
• D)[(Q₂ -Q₁)/Q₂)]/[(P₂ - P₁)/P₂].

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Definitions:

Base Amount

A reference value or starting point used in financial calculations or comparisons.

Vertical Analysis

A financial analysis method that lists each line item as a percentage of a base figure within the same financial statement.

Base Amount

The initial sum of money used as a reference point or starting figure for calculations, adjustments, or comparisons.

Net Sales

The amount of revenue generated from goods or services sold after deducting returns, allowances for damaged or missing goods, and discounts.