PED

Question 1

elasticity

Answer 1

measure of responsiveness how much a dependent variable changes in response to a change in an independent variable

Question 2

What change leads to what change?

Answer 2

change in price leads to a change in quantity demanded

Question 3

percentage change (price)

Answer 3

(Pn - Po)/Po x100

Question 4

price elasticity of demand

Answer 4

percentage change in quantity demanded in response to a percentage change in price

Question 5

PED equation

Answer 5

(Qn - Qo) x Po / (Pn - Po) x Qo

Question 6

What type of value do you take from the PED equation?

Answer 6

absolute (positive value)

Question 7

PED greater than 1

Answer 7

price elastic

Question 8

PED less than 1

Answer 8

price inelastic

Question 9

PED equals 1

Answer 9

unitary price elastic

Question 10

How do you label PED on demand curve?

Answer 10

Question 11

Where does unitary elasticity of demand occur?

Answer 11

at midpoint halfway between its intersection of the x and y axes

Question 12

total revenue equation

Answer 12

TR = price x quantity demanded

Question 13

How do price - quantity demanded and total revenue - quantity demanded curves align?

Answer 13

Question 14

Price elastic: price increases

Answer 14

Qd decreases TR decreases

Question 15

Price elastic: price decreases

Answer 15

Qd increases TR increases

Question 16

Price inelastic: price increases

Answer 16

Qd decreases TR increases

Question 17

Price inelastic: price decreases

Answer 17

Qd increases TR decreases

Question 18

Unitary elastic: price increases

Answer 18

Qd decreases TR no change

Question 19

Unitary elastic: price decreases

Answer 19

Qd increases TR no change

Question 20

availability and closeness of substitues for the good

Answer 20

greater number and closer substitues, higher PED

Question 21

time available to adjust to changes in price

Answer 21

more time available: higher PED

Question 22

long run

Answer 22

time sufficient to fully adjust to a change of price

Question 23

short run

Answer 23

any time shorter than long run

Question 24

necessity or luxury?

Answer 24

more necessity of good, lower PED

Question 25

addictive/habit-forming?

Answer 25

more addictive good, lower PED

Question 26

proportion of income spent

Answer 26

greater proportion of income spent on good, higher PED

Question 27

perfect elasticity of demand

Answer 27

Ed = undefined a lot is available at this price so consumers not willing to pay more and foolish for producers to charge less

Question 28

perfect inelasticity of demand

Answer 28

Ed = 0 consumers only buy a fixed amount of good, does not vary with price

Question 29

perfect unitary elasticity of demand

Answer 29

P x Q = k (constant) shape of curve is rectilinear hyperbola