Which term describes the degree to which demand changes when the price changes?

Which term describes the degree to which demand changes when the price changes?

• A. Price elasticity of demand
• B. Price elastic demand
• C. Income elasticity of demand
• D. Discretionary expenditure

Answer: (A)

Elasticity of demand tells us how much the quantity demanded responds to a change in price. The term describing this relationship is price elasticity of demand. It’s calculated as the percentage change in quantity demanded divided by the percentage change in price. A value greater than 1 (in absolute terms) means demand is elastic—the quantity changes a lot when price shifts. A value less than 1 means demand is inelastic—the quantity changes little. If it’s 1, demand is unit elastic. Other ideas describe different things: income elasticity of demand measures response to changes in income, and discretionary expenditure refers to spending on non-essentials.

Elasticity of demand tells us how much the quantity demanded responds to a change in price. The term describing this relationship is price elasticity of demand. It’s calculated as the percentage change in quantity demanded divided by the percentage change in price. A value greater than 1 (in absolute terms) means demand is elastic—the quantity changes a lot when price shifts. A value less than 1 means demand is inelastic—the quantity changes little. If it’s 1, demand is unit elastic.

Other ideas describe different things: income elasticity of demand measures response to changes in income, and discretionary expenditure refers to spending on non-essentials.