Elasticity of demand

Question 1

Price elasticity of demand (PED)

Answer 1

Measures the sensitivity of consumers demand to a change in the price of good/service

Question 2

Income elasticity of demand (YED)

Answer 2

Measures the sensitivity of consumers demand to a change in consumer income

Question 3

Cross elasticity of demand (XED)

Answer 3

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

Question 4

Elastic diagram looks like…

Answer 4

E horizontal line

Question 5

Inelastic diagram looks like…

Answer 5

I Vertical line

Question 6

Factors the determine PED

Answer 6

-Availability of substitutes
-Necessity or luxury
-Percentage of income
-Time

Question 7

PED calculation

Answer 7

PED=percentage change in quantity demanded/percentage change in price

Question 8

Percentage change

Answer 8

new-old/original *100

Question 9

PED=0

Answer 9

Perfectly inelastic

Question 10

PED=1

Answer 10

Unitary elastic

Question 11

PED=infinite (0/0)

Answer 11

Perfectly elastic

Question 12

Price inelastic

Answer 12

0-1

Question 13

Price elastic

Answer 13

1-infinite

Question 14

Where is elasticity most elastic

Answer 14

Most elastic at the top (socks)

Question 15

YED normal goods

Answer 15

Positive relationship + sign

Question 16

YED inferior goods

Answer 16

Negative relationship - sign

Question 17

The number (YED)

Answer 17

The bigger the number the more income elastic it is

Question 18

YED equation

Answer 18

YED=percentage change in quantity demanded/percentage change in income

Question 19

XED equations

Answer 19

XED=percentage change in quantity demanded of good B/good A

Question 20

XED +sign

Answer 20

substitute

Question 21

XED -sign

Answer 21

compliments

Question 22

Totally unrelated

Answer 22

0

Question 23

weak relationship

Answer 23

0-1

Question 24

strong relationship

Answer 24

1-infisnite