Market intervention - Elasticity

Question 1

What does elasticity measure?

Answer 1

• The sensitivity of demand to changes in market price

Question 2

How do you calculate elasticity of demand?

Answer 2

% change in quantity demanded divided by % change in price

Question 3

How do you know if something is elastic or inelastic?

Answer 3

Elastic = ped> 1 elastic demand 
Inelastic = PED<1 inelastic demand

Question 4

What does it mean if the value of PED is more than 1?

Answer 4

Change in demand is more than change in price

Question 5

What does it mean if the value of PED is less than 1?

Answer 5

Change in demand is less than change in price

Question 6

Whats an example of an inelastic good?

Answer 6

For example petrol, consumption won’t really change in theres an increase in price and its a necessity

Question 7

Whats an example of an elastic good?

Answer 7

• Doritos,make up, bread etc products where its easy to switch

Question 8

The steeper the curve the …. elastic?

Answer 8

More elastic the steeper the curve

Question 9

What happens if price decreases to demand?

Answer 9

Demand increases in both cases

Question 10

Whats an example of an inelastic good?

Answer 10

bus ticket,petrol etc

Question 11

What are the determinants of elasticity?

Answer 11

• Availability of substitutes

- Time period.. do u need something quickly? less elastic

Question 12

How do you calculate price elasticity of supply?

Answer 12

% change in supply due to a % change in price