Option 1: (ΔQ/Q) * (P/ΔP) -> This correctly represents the price elasticity of demand formula.
Option 2: (ΔQ/Q) * (ΔP/P) -> This multiplies two percentage changes, which is incorrect for elasticity calculation.
Option 3: (Q₁-Q₂/Q₁) * (P₁-P₂/P₁) -> This uses initial values as base but has incorrect signs and structure.
Option 4: (Q₂-Q₁/Q₂) * (P₂-P₁/P₂) -> This uses final values as base, which is not the standard formula.
Hence, Option 1: (ΔQ/Q) * (P/ΔP) -> The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Mathematically: PED = (ΔQ/Q) ÷ (ΔP/P) = (ΔQ/Q) × (P/ΔP) = (ΔQ/ΔP) × (P/Q). This formula gives us the ratio of the relative change in quantity to the relative change in price, showing how sensitive demand is to price changes. -> correct