elasticity

Question 1

PED

Answer 1

price elastic demand is when demand of the good/service changes in response to a price change

Question 2

How is PED measured

Answer 2

PED= %CHANGE IN QUANTITY / %CHANGE IN PRICE

Question 3

If Elastic PED what number

Answer 3

Elastic PED= GREATER THAN 1

Question 4

If Inelastic PED what number

Answer 4

inelastic PED=LESS THAN 1

Question 5

YED

Answer 5

income elastic goods is when a change in income changes the demand of goods/services

Question 6

YED POSITIVE

Answer 6

is normal goods . as income rises the demand for this good also rises

Question 7

YED negative

Answer 7

is inferior good . as income rises the demand for this good decreases

Question 8

XED

Answer 8

cross price elasticity - is when the price of one good increases or decreases there is a change in demand of another in response to the price change

Question 9

XED positive (close to 1)

Answer 9

the good is a substitute good

Question 10

XED negative

Answer 10

the good is a complement good

Question 11

XED CALCULATION

Answer 11

XED= %CHANGE IN QUANTITY GOOD A/ %CHANGE IN PRICE GOOD B

Question 12

PES

Answer 12

price elasticity of supply = the quantity of supply reacts to a change in price

Question 13

PES calculation

Answer 13

PES= % CHANGE QUANTITY SUPPLIED / % CHANGE PRICE

Question 14

FIRMS AIM TO BE HIGH ELASTIC PES

Answer 14

SO THEY CAN RAPIDLY REACT TO CHANGES IN PRICE