Chapter 11: Price elasticity of demand

Question 1

Price elasticity of demand (PED)

Answer 1

A measure of the responsiveness of the quantity demanded to a change in price

Question 2

Formula for price elasticity of demand

Answer 2

Percentage change in quantity demanded divided by percentage change in price

Question 3

Elastic demand

Answer 3

When the quantity demanded changes by a greater percentage than the change in price (more than 1)

Question 4

Inelastic demand

Answer 4

When the quantity demanded changes by a smaller percentage than the change in price (less than 1)

Question 5

Main determinant of PED

Answer 5

The availability of substitutes

Question 6

Perfectly elastic demand

Answer 6

When a change in price causes a complete change in the quantity demanded

Question 7

Perfectly inelastic demand

Answer 7

When a change in price has no effect on the quantity demanded

Question 8

Unit elasticity of demand

Answer 8

When changes in price causes an equal change in the quantity demanded, leaving total revenue unchanged