Which statement is true about the price elasticity of demand?

Which statement is true about the price elasticity of demand?

• A. It measures how much the price changes in response to quantity changes.
• B. It is always negative because price and quantity move inversely.
• C. It shows how sensitive quantity demanded is to changes in price, holding other factors constant.
• D. It depends on the units used to measure price or quantity.

Answer: (C)

Price elasticity of demand measures how much the quantity demanded responds to a change in price, holding other factors constant. It is defined as the percentage change in quantity demanded divided by the percentage change in price, so it directly gauges sensitivity: a large percentage change in quantity for a given price change means high elasticity, while little change means low elasticity. The sign indicates direction—price and quantity typically move in opposite directions—so elasticity is usually negative, but what matters most is the magnitude when discussing responsiveness. That’s why the correct statement describes elasticity as showing how sensitive quantity demanded is to price changes, with other factors held constant. It’s not about how much price changes due to quantity, and because elasticity uses percentage changes, it doesn’t depend on the units used to measure price or quantity.

Price elasticity of demand measures how much the quantity demanded responds to a change in price, holding other factors constant. It is defined as the percentage change in quantity demanded divided by the percentage change in price, so it directly gauges sensitivity: a large percentage change in quantity for a given price change means high elasticity, while little change means low elasticity. The sign indicates direction—price and quantity typically move in opposite directions—so elasticity is usually negative, but what matters most is the magnitude when discussing responsiveness. That’s why the correct statement describes elasticity as showing how sensitive quantity demanded is to price changes, with other factors held constant. It’s not about how much price changes due to quantity, and because elasticity uses percentage changes, it doesn’t depend on the units used to measure price or quantity.