Price and Income Elasticity Of Demand (Micro)

Question 1

What is price elasticity of demand

Answer 1

The responsiveness of demand to a change in price

Question 2

How do you calculate price elasticity of demand

Answer 2

% change in demand
———————————
% change in price

Question 3

What numerical value is perfectly elastic

Answer 3

Infinity

Question 4

What numerical value is perfectly inelastic

Answer 4

0

Question 5

What numerical value is price elastic

Answer 5

Between 1 and Infinity

Question 6

What numerical value is price inelastic

Answer 6

Between 0 and 1

Question 7

What is unitary (constant) elasticity

Answer 7

1

Question 8

What is income elasticity of demand

Answer 8

It shows the responsiveness of demand to a change in income

Question 9

What is the formula to calculate income elasticity of demand

Answer 9

% change in quantity demanded
——————————————————
% change in real income

Question 10

What type of good has a positive income elasticity

Answer 10

Normal goods

Question 11

What type of good has a negative income elasticity

Answer 11

Inferior goods

Question 12

What numerical value does a luxury good have

Answer 12

Above 1

Question 13

What numerical value does a necessity have

Answer 13

Between 0 and 1