Elasticity

Question 1

Definition of PED

Answer 1

Measures the responsiveness of quantity demanded to a change in price.

%change in P

Question 2

Definition of PES

Answer 2

Measure the responsiveness of quantity supplied to a change in price

%change in P

Question 3

Definition of YED

Answer 3

Measures the responsiveness of quantity demanded to a change in income.

%change in Y

Question 4

Definition of XED

Answer 4

Measures the responsiveness of quantity demanded of one good due to a change in the price of another.

%change in P of Good B

Question 5

Definition of XED

Answer 5

Measures the responsiveness of quantity demanded of one good due to a change in the price of another.

%change in P of Good B

Question 6

What are the determinants of PED

Answer 6

1. Durability
2. The number of uses the commodity has
3. The proportion of income spent on the commodity
4. The number and closeness of substitute goods.
5. Time period.

Question 7

When XED is positive

Answer 7

The goods are substitutes - A rise in the price of Good A leads to an increase in demand for Good B

Question 8

When XED is negative

Answer 8

The goods are complements - A rise in the price of Good A leads to a decrease in demand for Good B.

Question 9

When XED is 0

Answer 9

The goods are independent of each other.

Question 10

The determinants of PES

Answer 10

1. Time period
2. Factor mobility
3. The availability of stock
4. The existence of surplus capacity
5. Natural constraints