Price Elasticity of Demand

Question 1

What does PED (price elastisity of demand) measure?

Answer 1

the responsiveness of price on demand

Question 2

What is the equation for PED?

Answer 2

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

Question 3

What does it mean if demand is elastic?

Answer 3

this means when there is a change in price there is an even bigger % change in demand

Question 4

If demand is elastic will PED be greater or less than one?

Answer 4

greater than

Question 5

What are 5 characteristics of elastic goods?

Answer 5

1. goods which are a large portion of you income
2. luxury goods
3. goods with many substitutes
4. goods which are bought frequently
5. goods in a competitive market

Question 6

What does it mean if demand is ineslastic?

Answer 6

that means when there is a change is price there is a smaller % change in demand

Question 7

If deamand is inelastic than will the PED be greater or less than one?

Answer 7

less than

Question 8

Name 5 characteristics of an inelastic good

Answer 8

1. basic need
2. addictive
3. close to or no substitutes
4. small % of income
5. in the short term the consumer cant find substitutes