Elasticity

Question 1

What is price elasticity?

Answer 1

The measurement of how responsive, the quantity demanded or supply of a good or service would be affected by a change in a factor that affects it such as price and non-price variables

Question 2

What is the price elasticities of demand? (PED)

Answer 2

PEZ measures the responsiveness of quantity demanded to the changes in the price of a good or service

Question 3

Define price elasticity of demand (PED)

Answer 3

A measure of the change in the quantity demanded of a good in relation to its price change

Question 4

What is the formula of PED?

Answer 4

*QD P
PED= — x —
*P QD (Change is *)

Question 5

What does a PED of more then 1 mean

Answer 5

Elastic demand

Question 6

What does PED of less then 1 mean

Answer 6

Inelastic demand

Question 7

How do you measure total revenue

Answer 7

Total revenue = price x quantity demanded

Question 8

What are the determinants of price elasticity of demand?

Answer 8

1. Availability of substitutes for products.
2. Percentage of income spends on the product.
3. Necessity.
4. Habits, addictions, and fashions

Question 9

What is the price elasticity of supply?

Answer 9

Price elasticity of supply is a measure of the change in quantity supplied of a good in relation to its price change

Question 10

How is PES measured

Answer 10

*QS P
PES= — X —
*P Q

Question 11

Names of determinants of price elasticity of supply (PES)

Answer 11

1. The level of stocks.
2. The number of producers in the industry.
3. Fees and cost of factor substitutions.