elasticity of demand

Question 1

elasticity of demand

Answer 1

measure of how the QD of a product changes owing to a change in a factor that affects demand, such as price or income

Question 2

consumer’s real income

Answer 2

money available after the impact of inflation,or higher prices have been accounted for

Question 3

price elastic demand

Answer 3

occurs when a relatively small change in the price of a product causes a larger% change in QD ped>1

Question 4

price inelastic demand

Answer 4

a small change in a price of a product causes a smaller change in QD
ped<1

Question 5

equation for price elasticity of demand

Answer 5

percentage change in quantity demanded/ percentage change in price

Question 6

if you don’t have the percentage you use this equation

Answer 6

new figure-old figure/ old figure

Question 7

unitary price elastic

Answer 7

occurs when a given price change of a product leads to the same percentage change in QD
ped=1

Question 8

price elastic has alot of substitutes just like perfectly price elastic

Question 9

price inelastic has a lack of substitutes just like perfectly price inelastic

Question 10

perfectly price elastic demand

Answer 10

demand exists at one price only and any change in price leads to zero demand
ped= infinity
–= direction of diagram

Question 11

perfectly price inelastic demand

Answer 11

a change in price has no impact on the demand
ped=0
|= direction of diagram line

Question 12

determinants of price elasticity of demand

Answer 12

1. number of closeness of substitutes
2. proportion of income spent on the product
3. degree of necessity
4. time period under consideration