1.2.4 PED

Question 1

Price Elasticity of Demand

Answer 1

Measures how responsive demand is to a change in price.

Question 2

Elastic demand curve

Answer 2

A percentage change in price results in a proportionally larger percentage change in quantity demanded.

Question 3

Inelastic demand curve

Answer 3

A percentage change in price results in a proportionally smaller percentage change in quantity demanded.

Question 4

Factors influencing price elasticity of demand of a good or service

Answer 4

1) Availability of substitutes.
2) If good is luxury or necessity.
3) The proportion of income spent on the good.
4) How much time has elapsed since the time the price changed.

Question 5

Elasticity coefficient formula

Answer 5

% change in QD/ % change in price

Question 6

What does a value greater than 1 mean?

Answer 6

Price elastic.

Question 7

What does a value less than 1 mean?

Answer 7

Price inelastic.

Question 8

What does a value of 1 mean?

Answer 8

Unitary elastic - changing price leads to an equal change in quantity demanded.

Question 9

What does a value of 0 mean?

Answer 9

Perfectly inelastic, business can charge as high price as it wants.