Elasticities

Question 0

State the price elasticity of demand equation

Answer 0

Percentage change in quantity demanded/percentage change in price

Question 1

Define price elasticity of demand

Answer 1

Responsiveness of quantity demanded of a good to change in price

Question 2

PED > 1

Answer 2

Elastic

Question 3

PED=1

Answer 3

Unitarily elasticity

Question 4

PED < 1

Answer 4

In elastic

Question 5

PED=0

Answer 5

Perfectly inelastic (consumers are willing to pay any price)

Question 6

PED=infinity

Answer 6

Perfectly elastic (consumers are not willing to pay any more)

Question 7

Name for determinants of price elasticity of demand

Answer 7

Number of substitutes (more subs equals more elastic), proportion of income spent (high percentage equals more elastic), luxury/necessity (luxury equals more elastic), time period (longer considering equals more elastic)

Question 8

Define price elasticity of supply

Answer 8

The responsiveness of quantity supplied of a good to changes in price

Question 9

PES>1

Answer 9

Elastic

Question 10

PES<1

Answer 10

Inelastic

Question 11

Name three determinants of price elasticity of supply

Answer 11

Time (e.g. primary produce, takes longer to react), availability of factors of production (more availability leads to greater elasticity), natural conditions, costs (economic position/climate)

Question 12

Define income elasticity of demand

Answer 12

Responsiveness of quantity demanded to changes in income

Question 13

YED>1

Answer 13

Luxury

Question 14

YED>0 but <1

Answer 14

Normal/necessity

Question 15

YED<0

Answer 15

Inferior

Question 16

Define cross elasticity of demand

Answer 16

The responsiveness of quantity demanded to changes in price of another good

Question 17

Positive XED

Answer 17

Substitutes

Question 18

Negative XED

Answer 18

Compliments