Elasticity of Demand

Question 1

Relatively elastic D

Answer 1

PED> 1 = responsiveness of D is proportionally greater to a change in price

Question 2

Perfectly elastic D

Answer 2

PED = INFINITY → Theres only one price thats demanded

Question 3

Inelastic D

Answer 3

PED <1 responsiveness of D is proportionally less to a change in price

Question 4

Perfectly inelastic

Answer 4

PED=0

Question 5

PED

Answer 5

Measures responsiveness of QD to a change in price
- formula: % change Q ÷ % chang in P

Question 6

Unitary elastic

Answer 6

PED=0 → responsiveness in D is proportionally equal to a change in Price

Question 7

Total expenditure

Answer 7

Q bought x Avg price of product

Question 8

Total Rev

Answer 8

Q sold X Avg Price of product

Question 9

PED Determinants

Answer 9

• S ubstitutes
• P ercentage of income
• L uxury/Necessity
• A ddictive/ Habit forming
• T ime

Question 10

Total Rev w/ elastic D

Answer 10

Increase price - decrease TR
vice versa

Question 11

Total rev w/ Inelastic D

Answer 11

Increase price - increase TR
vice versa