Multiple Choice
Why does the price elasticity of demand generally increase (become more elastic) over time?
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4. Elasticity
Price Elasticity of Demand on a Graph
Multiple Choice
The price elasticity of demand coefficient measures:
A
the responsiveness of quantity demanded to changes in price
B
the slope of the demand curve at every point
C
the relationship between supply and demand at equilibrium
D
the total revenue earned by a firm at different prices
Verified step by step guidance1
Understand that the price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.
Recall the formula for price elasticity of demand: \(\text{Price Elasticity of Demand} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}\).
Recognize that this coefficient captures the responsiveness or sensitivity of consumers to price changes, not the slope of the demand curve or total revenue directly.
Note that the slope of the demand curve is related but not the same as elasticity because elasticity is a ratio of percentage changes, which is unit-free.
Conclude that the price elasticity of demand specifically measures the responsiveness of quantity demanded to changes in price.
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