ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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divided by the percentage change in price
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divided by the percentage change in quantity
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multiplied by the percentage change in price
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multiplied by the percentage change in quantity
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Detailed explanation-1: -The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.
Detailed explanation-2: -The point approach computes the percentage change in quantity supplied by dividing the change in quantity supplied by the initial quantity, and the percentage change in price by dividing the change in price by the initial price. Thus, the formula for the point elasticity approach is [(Qs2 – Qs1)/Qs1] / [(P2 – P1)/P1].
Detailed explanation-3: -Price elasticity is the ratio between the percentage change in the quantity demanded (Qd) or supplied (Qs) and the corresponding percent change in price. The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price.
Detailed explanation-4: -When percentage change in quantity equals percentage change in price, magnitude of elasticity of demand is equal to 1. This is the situation of unit elasticity.
Detailed explanation-5: -Cross-price elasticity of demand is the percentage change in the quantity of good A that is demanded as a result of a percentage change in the price of good B.