Question

price elasticity of demand refers to the ratio of the:
a. percentage change in the quantity demanded of a good to a percentage change in its price.
b. percentage change in price of a good in response to a percentage change in quantity demanded.
c. percentage change in price of a good to a percentage increase in income.
d. percentage change in the quantity demanded of a good to a percentage change in income.

Explanation:

Price elasticity of demand measures how responsive quantity demanded is to a change in the good's own price, calculated as the ratio of the percentage change in quantity demanded to the percentage change in the good's price. Option b reverses the correct ratio, while options c and d describe other elasticities (price-income elasticity, not price elasticity of demand).

Answer:

a. percentage change in the quantity demanded of a good to a percentage change in its price.