Question

What measures the responsiveness of quantity demanded to a change in price?

a Total revenue

b Income elasticity

c Price elasticity of demand

d Equilibrium price.

Answer 1

The answer is (c). Price elasticity of demand is a measure of responsiveness of quantity demanded to a change in the price of a commodity. It means that it is the change in quantity demanded because of change in the price of a commodity.

Option (a) is wrong because total revenue is the revenue earned by a seller by selling goods and services. It is computed as P*Q.

Option (b) is wrong because income elasticity of demand is a measure of responsiveness of quantity demanded to a change in the income of the consumer.

Option (d) is wrong because equilibirum price is the price level at which the quantity demanded by the buyers matches the quantity supplied by the sellers.