Which of the following gives measures of price elasticity of demand ?
Price elasticity is (ΔQₓ/Qₓ)/(ΔPₓ/Pₓ) = (ΔQₓ/ΔPₓ)(Pₓ/Qₓ), with sign retained or a minus sign added when reporting magnitude. The alternatives invert the response slope,…
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Which of the following gives measures of price elasticity of demand ?
Answer and explanation
Correct answer A
Price elasticity is (ΔQₓ/Qₓ)/(ΔPₓ/Pₓ) = (ΔQₓ/ΔPₓ)(Pₓ/Qₓ), with sign retained or a minus sign added when reporting magnitude. The alternatives invert the response slope, invert the scaling ratio, or provide only inverse slope and thus fail to give the elasticity. (ΔQₓ/ΔPₓ)·(Pₓ/Qₓ) : Correct percentage-response slope and scale. (ΔPₓ/ΔQₓ)·(Pₓ/Qₓ) : Inverts quantity response to price. (ΔQₓ/ΔPₓ)·(Qₓ/Pₓ) : Reverses the required price/quantity scaling. ΔPₓ/ΔQₓ : Inverse slope lacks percentage scaling.
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UGC NET Economics