Question

if the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is: a. elastic. b. perfectly inelastic. c. perfectly elastic. d. inelastic.

Explanation:

Price elasticity of demand is calculated as the ratio of the percentage change in quantity demanded to the percentage change in price. When the percentage change in quantity demanded is larger than that in price, the absolute value of this ratio is greater than 1, which defines elastic demand. Perfectly inelastic means quantity demanded does not change with price, perfectly elastic means an infinitesimal price change causes an infinite quantity change, and inelastic means percentage change in quantity is smaller than that in price.

Answer:

a. elastic.