Price elasticity of demand is defined as which of the following?

The price elasticity of demand is a crucial concept in economics that measures how responsive the quantity demanded of a good is to a change in its price. The correct definition highlights this relationship by expressing it as the percentage change in quantity demanded divided by the percentage change in price.

When the price of a good changes, consumers react by buying more or less of that good. The elasticity helps quantify the degree of this reaction. If a small change in price results in a large change in quantity demanded, the demand is considered elastic, while if a large change in price leads to a small change in quantity demanded, the demand is inelastic. This concept aids businesses and policymakers in understanding consumer behavior and making informed decisions regarding pricing strategies, taxes, and subsidies.

The other options do not capture the essential relationship of responsiveness to price changes in terms of percentage changes, which is key to understanding elasticity. The first option focuses solely on the total quantity demanded at a price without considering price change impacts. The second option inverts the relationship by placing price changes in the numerator, which does not align with the established understanding of elasticity. The last option merely describes a change in quantity demanded without relating it to price, making it insufficient for defining elasticity.