The price elasticity of demand measures the:

• A. relationship between price and supply
• B. total revenue earned by a firm
• C. change in consumer income
• D. responsiveness of quantity demanded to changes in price

Answer: (D)

Verified step by step guidance

1. Understand that the price elasticity of demand is a concept in microeconomics that quantifies how much the quantity demanded of a good responds to a change in its price.
2. Recall the formula for price elasticity of demand, which is given by: \[\text{Price Elasticity of Demand} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}\]
3. Recognize that this measure focuses specifically on the relationship between price and quantity demanded, not supply, total revenue, or consumer income.
4. Interpret the elasticity value: if the absolute value is greater than 1, demand is elastic (quantity demanded changes more than price); if less than 1, demand is inelastic (quantity demanded changes less than price).
5. Conclude that the price elasticity of demand captures the responsiveness of quantity demanded to changes in price, which is why the correct answer is that it measures this responsiveness.