Why do economists use percentages rather than absolute amounts in measuring the responsiveness of consumers to changes in price?
Please provide the best answer for the statement.
There are two basic reasons. First, the choice of units when absolute changes are used will have an arbitrary effect on the interpretation of responsiveness. For example, if price is calculated in dollars, then a one-unit drop in price (from $5 to $4) might be associated with a 10-unit increase in quantity. If, however, the price was calculated in cents, then a 100-unit drop in price would be associated with a 10-unit increase in quantity. In the first case, it would appear the demand is inelastic and in the second case it would appear to be elastic. Second, the use of percentages allows comparisons to be made across products. You can compare the percentage change in quantity demanded to a percentage change in price across all products for which you have data on changes in price and quantity demanded.
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a. True b. False Indicate whether the statement is true or false
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