ECON 2.4-2.6: PED, YED, and PES

Question 1

Price elastic demand

Answer 1

Change in the price of a good or service leads to a proprotionally LARGER change in the quantity DEMANDED of the good or service.
PED > 1

Question 2

Price elastic supply

Answer 2

Change in the price of a good or service leads to a proportionally LARGER change in the quantity SUPPLIED of the good or service.
PES > 1

Question 3

Price inelastic demand

Answer 3

Change in the price of a good or service leads to a proportionally SMALLER change in the quantity DEMANDED of the good or service.
PED < 1

Question 4

Price inelastic supply

Answer 4

Change in the price of a good or service leads to a proportionally SMALLER change in the quantity SUPPLIED of the good or service.
PES < 1

Question 5

Define price elasticity of demand.

Answer 5

PED
A measure of the responsiveness of the Qd of a good or service when there is a change in its price.

Question 6

Define price elasticity of supply.

Answer 6

PES
A measure of the responsiveness of the Qs of a good or serivce when there is a change in its price.

Question 7

Unitary elastic demand

Answer 7

Change in the price of a good or service leads to an equal and opposite proportional change in the quantity demanded of the good or service.
PED = 1

Question 8

Unitary elastic supply

Answer 8

Change in the price of a good or service leads to an equal and proportional change in the quantity supplied of the good or service.
PES = 1

Question 9

Perfectly elastic demand

Answer 9

An increase in the price of a good or service leads to a fall in the quantity demanded of the good or service to zero.
PED = infinity

Question 10

Perfectly elastic supply

Answer 10

A fall in the price of a good or service leads to a fall in the quantity demanded of the good or service to zero.
PES = infinity

Question 11

Perfectly inelastic demand

Answer 11

Change in the price of a good or service leads to no change in the quantity demanded.
PED = 0

Question 12

Perfectly inelastic supply

Answer 12

Change in the price of a good or service leads to no change in the quantity supplied.
PES = 0