Which measures the degree of responsiveness of demand for a product due to a change in the price of that product?

Which measures the degree of responsiveness of demand for a product due to a change in the price of that product?

• A. Price
• B. Price wars
• C. Premium pricing
• D. Price elasticity of demand (PED)

Answer: (D)

The degree to which demand responds to a price change is captured by price elasticity of demand. It tells you how much quantity demanded changes, in percentage terms, for a given percentage change in price. If demand is elastic, a small price change leads to a large change in quantity, which matters for revenue planning and pricing strategy. If demand is inelastic, price changes have only a modest effect on quantity. The elasticity value is usually considered in absolute terms because price and quantity move in opposite directions, so the magnitude matters more than the direction of the movement. Other options describe the price level, market competition, or a pricing strategy, not a measurement of responsiveness to price changes. Therefore, the measure of how responsive demand is to price changes is price elasticity of demand.

The degree to which demand responds to a price change is captured by price elasticity of demand. It tells you how much quantity demanded changes, in percentage terms, for a given percentage change in price. If demand is elastic, a small price change leads to a large change in quantity, which matters for revenue planning and pricing strategy. If demand is inelastic, price changes have only a modest effect on quantity. The elasticity value is usually considered in absolute terms because price and quantity move in opposite directions, so the magnitude matters more than the direction of the movement. Other options describe the price level, market competition, or a pricing strategy, not a measurement of responsiveness to price changes. Therefore, the measure of how responsive demand is to price changes is price elasticity of demand.