definitions

Question 1

price elasticity of demand (PED)

Answer 1

measures the degree of responsiveness of quantity demanded for a product following a change in its price, along a given demand curve

Question 2

cross price elasticity of demand (XED)

Answer 2

measures the degree of responsiveness of demand for one product following a change in the price of another product

Question 3

complements

Answer 3

products that are jointly demanded (e.g. cars and petrol, or a wedding dress and wedding rings)

Question 4

substitutes

Answer 4

products that can be used as alternatives (e.g. apple iphones or samsung galaxy smartphones, and private jets or helicopters)

Question 5

income elasticity of demand (YED)

Answer 5

measures the degree of responsiveness of demand following a change in income

Question 6

normal goods

Answer 6

products that customers tend to buy more of as their income level increases; they compromise necessities (such as food) and luxuries (such as cars)

Question 7

inferior goods

Answer 7

products with a negative income elasticity of demand, i.e. the demand for such products fall when consumer income levels rise

Question 8

luxury goods

Answer 8

superior goods and services as their demand is highly income elastic, i.e. an increase in income leads to a proportionally greater increase in the demand for luxuries

Question 9

price elasticity of supply (PES)

Answer 9

measures the degree of responsiveness of quantity supplied of a product following a change in its price along a given supply curve

Question 10

elasticity

Answer 10

a measure of the responsiveness of a variable to changes in price or any of the variable’s determinants