Elasticity

Question 1

what is price elasticity demand(PED) ?

Answer 1

PED measures the responsiveness of demand to a change in price

Question 2

what is the formula for price elasticity of demand ?

Answer 2

percentage change in Quantity demand
__________________________________
percentage change in price

Question 3

what is a price elastic good?
what is a price inelastic good ?
what is a unitary demand good ?

Answer 3

elastic good - a good with alternatives , therefore demand changes when price does
inelastic - a good with no alternatives ., therefore demand barely changes when prices does
unitary demand - they increase and decrease the same amount

Question 4

what can affect Price elasticity of demand ?

Answer 4

• Substitute
• percentage of income
• Time
• Definition of the market

Question 5

what is price elasticity of supply (PES)?

Answer 5

price elasticity of supply measures the responsiveness of quantity supply to a change in price

Question 6

what is the formula for Price elasticity of supply ?

Answer 6

%change in quantity supplied
_______________________
% change in price

Question 7

what can affect the Price elasticity of supply ?

Answer 7

production lag
stocks 
spare capacity 
time 
substitutes of factors of production

Question 8

what is cross elasticity of demand(XED)?

Answer 8

cross elasticity of demand measures the responsiveness of a change in demand of one good to a change in price of another good

Question 9

what is the formula for cross elasticity of demand ?

Answer 9

%change in quantity demanded for good x
_________________________________
%change in price of good y

Question 10

factors that affect cross elasticity of demand ?

Answer 10

substitutes

complement

Question 11

finish the sentence ?

complements will have a _____ cross elasticity of demand .

substitutes will have a ______ cross elasticity of demand

Answer 11

complements will have a NEGATIVE cross elasticity of demand.

substitutes will have a POSITIVE cross elasticity of demand .

Party- positive
Starts- substitute
Near- negative
Christmas - complements

Question 12

what is income elasticity of demand (YED) ?

Answer 12

income elasticity tells us the sensitivity of demand to a change in income

Question 13

what factors affect income elasticity of demand ?

Answer 13

• weather it is luxury or necessity
• the level of income
• as income increases they are likely to spend more on luxury goods

Question 14

what is the formula for income elasticity of demand ?

Answer 14

%change in quantity demand
_______________________
%change in income