2.6 PRICE ELASTICITY OF DEMAND

Question 1

what are the 4 basic types of elasticity

Answer 1

1) price elasticity of demand (PED)
2) price elasticity of supply (PES)
3) income elasticity of demand (YED)
4) cross elasticity of demand (XED)

Question 2

what is price elasticity of demand

Answer 2

a measure of how much price changes demand

Question 3

how to calculate PED

Answer 3

percentage change in quantity demanded / percentage change in price

Question 4

determinants of PED

Answer 4

• time period
• number and closeness of substitutes
• proportion of income
• luxury vs necessity

Question 5

important rule for economics

Answer 5

in economics, PED has a (-) sign infant unlike in business