What is the formula for calculating price elasticity of demand?

The formula for calculating the price elasticity of demand focuses on the responsiveness of quantity demanded to changes in price. The correct representation is that the price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. This measurement helps understand how sensitive consumers are to price changes for a good or service.

When the price elasticity of demand is calculated using this formula, it indicates whether demand is elastic (greater than 1), inelastic (less than 1), or unitary elastic (equal to 1). A higher elasticity indicates that quantity demanded is significantly affected by price changes, while a lower elasticity implies that quantity demanded is relatively unchanged by price fluctuations.

In contrast, the other options do not accurately reflect how price elasticity of demand is calculated. Some options involve incorrect relationships or utilize aspects of supply or demand in ways that are not relevant to determining price elasticity of demand specifically.