Price elasticity of demand

Question 1

What is Price Elasticity of Demand?

Answer 1

Measures the extent to which the quantity of a product demanded is affected by a change in price.

Question 2

How is price elasticity of demand calculated?

Answer 2

% change in quantity demanded / % change in price

Question 3

What is meant by price elastic?

Answer 3

Change in demand is more than the change in price.

Question 4

What is the value of Price Elasticity of demand when it is elastic?

Answer 4

More than 1

Question 5

What is meant by price inelastic?

Answer 5

Change in demand is less the change in price.

Question 6

What is the value of Price Elasticity of demand when it is inelastic?

Answer 6

Less than 1

Question 7

What is unitary price elasticity?

Answer 7

Change in demand = change in price

Question 8

What is the value of Price Elasticity of demand when it is unitary price Price elasticity?

Answer 8

Exactly 1

Question 9

What has a major effect on demand when the price changes?

Answer 9

Holidays

Question 10

What can have a minor effect on demand when price changes?

Answer 10

Petrol

Question 11

Are price elastic goods often more expensive than price inelastic goods?

Answer 11

Yes - more expensive (luxury)

Inelastic - not expensive (normally a necessity)

Question 12

What is income elasticity of demand?

Answer 12

Measures the extent to which the quantity of a product demanded is affected by the change in income.

Question 13

How do you calculate income elasticity of demand?

Answer 13

% change in quantity demanded / % change in income

Question 14

What will happen when you have a rise in income to the demand of the product?

Answer 14

Rise (increase) in demand

Question 15

What will happen when you have a fall in income to the demand of the product?

Answer 15

A fall (decrease) in demand

Question 16

What is the income elasticity of luxury items?

Answer 16

More than 1

Question 17

What is the income elasticity of necessities?

Answer 17

Less than 1 but more than 0