Price Elasticity of Demand

Question 1

What does PED stand for

Answer 1

price elasticity of demand

Question 2

What is the PED

Answer 2

Measures the responsiveness of quantity demanded, given a change in price

Question 3

What is the equation for PED

Answer 3

Percentage change in quantity demanded / percentage change in price

Question 4

What is PED always

Answer 4

negative

Question 5

What is the PED when >1

Answer 5

demand is price elastic

Question 6

What is the PED when <1

Answer 6

demand is price inelastic

Question 7

What is PED when 0

Answer 7

demand is perfectly price inelastic

Question 8

What is PED when ∞

Answer 8

demand is perfectly elastic

Question 9

What is PED when 1

Answer 9

demand is unit price elastic

Question 10

When is demand price elastic

Answer 10

> 1
∞ (Perfectly)
1 (unit price)

Question 11

When is demand price inelastic

Answer 11

<1
0 (perfectly)

Question 12

What does perfectly inelastic mean

Answer 12

regardless of the price change, quantity demanded wont change

Question 13

What does it mean when price is inelastic

Answer 13

Quantity demanded goes down but proportionally less than the increase in price

Question 14

What does it mean when price is elastic

Answer 14

as price goes down, quantity demanded increases but proportionally more than the decrease in price

Question 15

When price is inelastic what does it look like on a graph

Answer 15

a steep demand curve

Question 16

When price is perfectly inelastic what does it look like on a graph

Answer 16

a vertical demand curve

Question 17

When price is elastic what does it look like on a graph

Answer 17

A shallow demand curve

Question 18

When price is perfectly elastic what does it look like on a graph

Answer 18

a horizontal demand curve

Question 19

When is demand for a good/service price elasticity or price inelastic

Answer 19

SPLAT

Question 20

What does SPLAT stand for

Answer 20

S - substitutes (no.)
P - percentage of income
L - luxury/necessity
A - addictive/habit forming
T - time period

Question 21

Do luxuries have elastic or inelastic demand

Answer 21

Tend to have elastic demand

Question 22

Do necessities have elastic or inelastic demand

Answer 22

Tend to have inelastic demand

Question 23

Do addictive products have elastic or inelastic demand

Answer 23

has inelastic demand

Question 24

Do habit forming products have elastic or inelastic demand

Answer 24

has inelastic demand

Question 25

Which time period has inelastic demand

Answer 25

short run

Question 26

Which time period had elastic demand

Answer 26

long run