Which is true regarding price elasticity of demand?

Question

BlackTom AI · Accepted Answer

Price elasticity of demand measures the percentage change in quantity demanded resulting from a one percent change in price: PED = (% change in Qd) / (% change in P). By definition PED is usually negative because price and quantity move in opposite directions under the law of demand, so economists often report its absolute value to focus on responsiveness.

1) Relevant knowledge points and concepts
- Definition and formula: PED = (ΔQ/Q) ÷ (ΔP/P) or %ΔQ / %ΔP.
- Sign convention: ΔQ and ΔP typically have opposite signs, making PED negative; reporting the absolute value avoids sign confusion.
- Interpretation: |PED| > 1 is elastic (consumers very responsive), |PED| < 1 is inelastic (consumers not very responsive).
- Law of demand: ceteris paribus, price rises lead to quantity demanded falling (inverse relationship). (Rare exceptions such as Giffen or Veblen goods exist, but standard analysis assumes the law holds.)

2) Step-by-step reasoning
- Because PED = %ΔQ / %ΔP and ΔQ usually moves opposite to ΔP, PED is negative. To discuss responsiveness we take the absolute value: therefore it is usually expressed as an absolute value.
- The inverse relationship from the law of demand implies the numerator and denominator have opposite signs, yielding a negative PED; thus elasticity refers to an inverse relationship.
- The magnitude of PED (absolute value) measures responsiveness: a larger magnitude implies a bigger percentage change in Q for a given percentage change in P, so consumers are more responsive.

3) Sample calculation (intermediate steps)
If price increases by 10% and quantity demanded falls by 20%:
PED = (-20%) / (+10%) = -2 → |PED| = 2. Since 2 > 1, demand is elastic and consumers are highly responsive.

4) Why the correct answer is correct
Each individual statement given is a true description of price elasticity: it’s typically expressed as an absolute value, it reflects the (generally) inverse relationship between price and quantity demanded, and larger values indicate greater responsiveness. Therefore “all of these” correctly captures all true properties.

5) Why the other options alone are not the best final choice
Each specific option is a correct statement, but selecting one alone omits the others. The inclusive choice “all of these” is therefore the most complete and correct selection.

6) Conclusion
All three specific statements are correct, so the correct answer is “all of these,” which matches the provided answer.

Which is true regarding price elasticity of demand?单项选择题

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