Why isn't price elasticity of demand simply measured by the slope of the demand curve?

• A. Because elasticity depends on the percentage change in both price and quantity, not just their absolute changes.
• B. Because the slope of the demand curve always remains constant regardless of the units used.
• C. Because elasticity only applies to perfectly elastic or perfectly inelastic demand curves.
• D. Because the slope of the demand curve measures total revenue, not responsiveness to price changes.

Answer: (A)

Verified step by step guidance

1. Understand that the price elasticity of demand measures the responsiveness of quantity demanded to changes in price, specifically in terms of percentage changes rather than absolute changes.
2. Recall that the slope of the demand curve is calculated as the change in price divided by the change in quantity (\(\frac{\Delta P}{\Delta Q}\)), which depends on the units used for price and quantity and represents absolute changes.
3. Recognize that elasticity is a unit-free measure because it uses percentage changes: \(\text{Elasticity} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}\).
4. Note that because the slope depends on the units of measurement, it can vary if we change units (e.g., dollars to cents), whereas elasticity remains consistent regardless of units.
5. Conclude that elasticity cannot be simply measured by the slope of the demand curve because elasticity accounts for relative (percentage) changes, making it a more accurate measure of responsiveness than the slope.