How is price elasticity of demand calculated?

Price elasticity of demand measures how responsive the quantity demanded of a good is to a change in its price. The correct calculation involves taking the percentage change in quantity demanded and dividing it by the percentage change in price. This relationship helps to determine how sensitive consumers are to price changes. A high price elasticity indicates that consumers are very responsive to price changes, while a low elasticity suggests that quantity demanded is less affected by changes in price.

The formula reflects that when prices increase or decrease, the resulting change in quantity demanded is expressed as a percentage of the original quantity demanded, and likewise, the change in price is expressed as a percentage of the original price. This provides a clear, quantifiable way to assess demand behavior in relation to price fluctuations.

Other options do not effectively represent the concept of price elasticity of demand: one mentions quantity supplied instead of quantity demanded, another relates to income instead of price changes, and the last mixes demand and supply changes incorrectly. Therefore, the option that correctly represents the calculation of price elasticity of demand focuses solely on the relationship between quantity demanded and price changes.