Elasticity of demand 1.2.3

Question 1

what is elasticity

Answer 1

Elasticity is a measure of sensitivity or responsiveness.

Question 2

what are the three versions of elasticity of demand

Answer 2

price elasticity of demand
income elasticity of demand
cross elasticity of demand

Question 3

what is price elasticity of demand

Answer 3

this measures the sensitivity of consumer demand to a change in the price of a good/service.

Question 4

what is income elasticity of demand

Answer 4

this measures the sensitivity of consumer demand to a change in consumer income.

Question 5

what is cross elasticity of demand

Answer 5

this measures the sensitivity of the demand for one good following a change in the price of another good/service

Question 6

definition of price elasticity of demand

Answer 6

price elasticity of demand measures the sensitivity of the quantity demanded of a good or service following a change in its price.

Question 7

which factors determine the rate of price elasticity of demand

Answer 7

The number of close substitutes available
Whether the good is a necessity or a luxury
The proportion of income spent on the good
The time period

Question 8

What is the formula for price elasticity of demand

Answer 8

PED = %Δ Qd
%Δ P
or price elasticity of demand =
percentage change of quantity demanded
———————————————————————–
percentage change in price