CIPS L4m5 Commercial Negotiation · Free Practice Question Medium
Question 4
Which of the following is definition of elasticity of demand in microeconomics?
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A
The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
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B
The percentage change in price of a good divided by the percentage change in the quantity demanded of that good.
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C
The percentage change in income divided by the percentage change in the quantity demanded
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D
The percentage change in the quantity demanded divided by the percentage change in income
Reveal correct answer
Correct answer: A
Explanation
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor:
- The price of a product can be described as being elastic if a small change in price leads to a big change in demand.
- The price of a product can be described as being inelastic if a big change in price leads to a small change in demand.
The formulae of elasticity of demand is known as the following:
LO 2, AC 2.2
Discussion
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