What is price elasticity of demand and how should a business use it to set price?

• A. Elasticity measures how a percentage change in price affects quantity demanded; use elastic demand to adjust price to maximize revenue, and inelastic demand to raise prices with less volume loss.
• B. Elasticity measures how much revenue changes with price.
• C. Elasticity is the ratio of price to quantity demanded.
• D. Elasticity describes how sensitive consumers are to changes in income.

Answer: (A)