Which formula is used to calculate price elasticity of demand?

The formula for calculating price elasticity of demand is based on the concept of responsiveness of quantity demanded to a change in price. Price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. This approach captures how significantly consumers adjust their purchasing behavior in response to price changes.

Using percentage changes rather than absolute changes allows for a more nuanced understanding of elasticity, especially since it can vary depending on the original price and quantity levels. This makes the measure scale-independent, a crucial feature when comparing goods with different price points or quantities.

The choice regarding total revenue does not directly relate to the calculation of elasticity and instead involves understanding the implications of elasticity on revenue. Additionally, combining terms related to quantity supplied along with price changes does not pertain to the determination of demand elasticity and focuses on supply-side dynamics. This further emphasizes why the correct choice emphasizes the relationships of percentage changes in demand and price specifically related to consumer behavior.