Micro ~ Module 3: Elasticity

Question 1

Define Price Elasticity of Demand (including equation)

Answer 1

The responsiveness of demand to changes in price (PED = % Change in Quantity Demanded / % Change in Price)

Question 2

Define Price Elasticity of Supply (including equation)

Answer 2

The responsiveness of supply to changes in price (PES = % Change in Quantity Supplied / % Change in Price)

Question 3

Define Income Elasticity of Demand (including equation)

Answer 3

The responsiveness of demand to changes in income (YED = % Change in Quantity Demanded / % Change in Income)

Question 4

Define Cross Elasticity of Demand (including equation)

Answer 4

The responsiveness of demand to changes in price of another good (XED = % Change in Quantity Demanded of good A / % Change in Price of good B)

Question 5

What type of elasticity is PED=0?

Answer 5

Perfectly inelastic

Question 6

What type of elasticity is it when PED is less than 1?

Answer 6

Inelastic

Question 7

What type of elasticity is it when PED=1?

Answer 7

Unitary Elastic

Question 8

What type of elasticity is it when PED is greater than 1?

Answer 8

Elastic

Question 9

What type of elasticity is it when PED is infinite?

Answer 9

Perfectly Elastic