Price elasticity of demand

Question 1

What is the definition of PED?

Answer 1

Price elasticity of demand is the responsiveness of demand to a change in price.

Question 2

What is the formula of PED?

Answer 2

PED = % change in quantity demanded/% change in price

Question 3

What would a perfectly inelastic curve look like?

Answer 3

straight vertical |

Question 4

What would a perfectly elastic curve look like?

Answer 4

straight horizontal -

Question 5

Define price inelastic

Answer 5

a change in price results in a smaller change in the quantity demanded

Question 6

Define price elastic

Answer 6

A change in price results in a greater change in the quantity demanded

Question 7

Define perfectly inelastic

Answer 7

A change in price will result in no change at all in the quantity demanded

e.g. insulin

Question 8

Define perfectly elastic.

Answer 8

An increase in price will lead to no demand at all

Question 9

Define unitary elastic

Answer 9

The % change in price results in the exact same % change in demand

Question 10

What factors shift PED?

Answer 10

Proportion of income spent on a product
Addictiveness - relatively inelastic
Necessity - essential goods are inelastic, luxury goods are elastic
Time (urgency)
Substitues available

Question 11

What is the value for price inelastic?

Answer 11

less than 1
<1

Question 12

What is the value for prince elastic?

Answer 12

more than 1

Question 13

What is the value for perfectly inelastic?

Answer 13

0

Question 14

What is the value for perfectly elastic?

Answer 14

infinity

Question 15

What is the value for unitary elastic?

Answer 15

1