Elasticity of Demand

Question 1

What does “demand is elastic” mean?

Answer 1

If demand is elastic, the percentage change in demand is greater than the percentage change in price, the elasticity coefficient is greater than 1 and total revenue will change in the opposite direction as the change in price.

Question 2

Identify four measures of elasticity.

Answer 2

Elasticity of Demand;
Elasticity of Supply;
Income Elasticity of Demand;
Cross Elasticity of Demand.

Question 3

Define “elasticity” (as used in economics).

Answer 3

Measures the percentage change in a market factor as a result of a given percentage change in another market factor.

Question 4

Define “elasticity of supply”.

Answer 4

The percentage change in the quantity of a commodity supplied as a result of a given percentage change in the price of the commodity.

Question 5

Define “elasticity of demand”.

Answer 5

The percentage change in quantity of a commodity demanded as a result of a given percentage change in the price of the commodity.