LS12 and 13

Question 1

Price elasticity of demand

Answer 1

Measures the responsiveness of Demand given a change in price

Question 2

Elastic Demand

Answer 2

When a change in price causes a proportionately larger change in demand

Question 3

Inelastic Demand

Answer 3

Where a change in price causes a proportionately smaller change in demand

Question 4

Price Elasticity of Supply

Answer 4

Measures the responsiveness of supply given a change in price causes

Question 5

Supply Elastic

Answer 5

When a change in price causes a proportionately larger change in supply

Question 6

Supply Inelastic

Answer 6

When a change in price causes a proportionately smaller change in supply

Question 7

Factors that affect the Price Elasticity of Demand

Answer 7

SPLAT
S - Substitutes
P - Proportion of Income
L - Luxury/Necessity
A - Addictiveness
T - Time

Question 8

Factors that affect the Price Elasticity of Supply

Answer 8

PSSST
P - Production Lag
S - Stock
S - Spare Capacity
S - Substitutability of FoP
T - Time

Question 9

How to Calculate Price Elasticity of Demand

Answer 9

% Change in quantity supplied/ % Change in quantity demanded

Question 10

How to calculate Price Elasticity of Supply

Answer 10

% Change in quantity demanded / % Change in Price