5. What is elasticity of demand?

A. Demand that is not very sensitive to a change in price.
B. A measure of the stability of prices.
C. Demand that is very sensitive to a change in price.
D. A measure of how consumers react to a change in price.



Answer :

Final answer:

Price elasticity of demand measures how quantity demanded responds to price changes.


Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Demand is described as price elastic, unit price elastic, or price inelastic based on the value obtained.


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