Price Elasticity of Demand

Question 1

What is the equation of price elasticity of demand?

Answer 1

% change in quantity demanded divided by % change in price

Question 2

What is the definition of price elasticity of demand?

Answer 2

The responsiveness of quantity demanded to a change in price of a good or service

Question 3

PED = 0

Answer 3

Perfectly inelastic

Question 4

What should a business do if the good is perfectly inelastic?

Answer 4

Charge as high a price as they wish

Question 5

PED is between 1 and -1

Answer 5

Inelastic

Question 6

What should firms do if the good is inelastic?

Answer 6

Raise prices to increase total revenue

Question 7

When is YED inelastic?

Answer 7

Between 1 and -1

Question 8

PED=1

Answer 8

Unitary elastic

Question 9

What does unitary elastic mean?

Answer 9

Increasing or decreasing prices will lead to no change in revenue

Question 10

When is PED unitary elastic?

Answer 10

PED=1

Question 11

PED is less than -1 and greater than 1

Answer 11

Elastic

Question 12

What should firms do if the good is elastic?

Answer 12

Lower prices to increase risk revenue

Question 13

What PED is a good elastic?

Answer 13

Less than -1 and greater than 1

Question 14

PED=〰

Answer 14

Perfectly elastic

Question 15

What happens if a firm increases the price of a perfectly elastic good?

Answer 15

Demand would disappear