Chapter 6, Problem 6.1.1RQ

Write the formula for the price elasticity of demand. Why isn’t elasticity just measured by the slope of the demand curve?

To determine

Formula for price elasticity of demand.

Explanation of Solution

Price-elasticity of demand is the responsiveness of the quantity demanded to the change in price. The formula for price elasticity of demand is percentage changes in quantity demanded divided by percentage changes in price. It can be symbolically expressed as follows:

$\text{Price}\text{elasticity}\text{of}\text{demand=}\frac{\text{Percentage}\text{change}\text{in}\text{quantity}\text{demanded}}{\text{Percentage}\text{change}\text{in}\text{price}}$

The price elasticity of demand is measured by using the slope of the demand curve.  Because, the slope states that how much the quantity changes according to the change in price.

Economics Concept Introduction

Concept Introduction:

Price elasticity of demand: Price elasticity of demand refers to the responsiveness of changes or the change in quantity demanded due to the change in price.