Chapter 9

Question 1

What is elasticity of demand ?

Answer 1

How much demand will change as a result of a change in conditions of demand.

Question 2

What is price elasticity in demand?

Answer 2

%change in price

Multiplied by

Quantity

Question 3

What is elastic demand?

Answer 3

Value of elasticity > 1 meaning

% change in price brings larger %change in demand

Question 4

What is inelastic demand?

Answer 4

Value of elasticity < 1

Meaning that %change in price brings a smaller %change in demand.

Question 5

What is unitary demand?

Answer 5

Value of elasticity = 1

When %change in price brings the exact same %change in demand.

Question 6

Read Notes for More detail yellow highlight.

Answer 6

Noted Boss man

Question 7

What determines the price elasticity of demand?

Answer 7

Available substitutes ( competition)
The time period
Better alternatives

Question 8

Why do necessities have a lower price elasticity?

Answer 8

(INFERIOR GOODS) They are crucial for survival so price will not change demand.

Question 9

Why are proportionately cheap goods less elastic?

Answer 9

It isn’t worth changing the source of the good even when price changes as it takes up a proportionately small amount of expenditure.