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Why do economics use percentage cgange to calcuate elasticity demand?

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Why do economics use percentage cgange to calcuate elasticity demand?

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  1. We focus on percentage change because we are interested in the effects of a price change.  When a company changes the price of its goods it is interested in the change in quantity demand because the change is, presumably, caused only by the change in price.


  2. Percent changes are unit free and give a better picture of how consumers respond to a price change.  Think of changing the price of a good by $1.  If we are talking dollars, then the unit change in price is one unit.  However if we are talking pennies, then the same $1 change would show up as a 100 unit price change (100 pennies in a dollar).  Using percentage change takes this issue off the table.

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