Price Elasticity of Demand (PED)

Question 1

What is PED?

Answer 1

measurement used in economics to show the responsiveness, or elasticity of the quantity demanded of a good or service a change in its price ceteris paribus

Question 2

What is PED used to show?

Answer 2

responsiveness/sensitivity

Question 3

What value do elastic goods have?

Answer 3

greater than 1

Question 4

What value do inelastic goods have?

Answer 4

less than 1

Question 5

What happens to price and demand if a good is elastic?

Answer 5

As price goes down demand goes up, and as price goes up demand goes down

Question 6

How do you calculate price elasticity?

Answer 6

(% change in quantity demanded) / (% change in price)

Question 7

What would a perfectly inelastic graph look like?

Answer 7

straight, vertical line

Question 8

What would a perfectly elastic graph look like?

Answer 8

straight, horizontal line

Question 9

What does it not necessarily mean with inelastic goods if price drops?

Answer 9

more revenue

Question 10

Name some elastic goods

Answer 10

holidays, cars, clothes, houses

Question 11

Name some inelastic goods

Answer 11

utility supplies, oil (fuel; petrol, diesel etc), energy supplies, basic food supplies

Question 12

Name the 3 variables that can influence elasticity

Answer 12

• Time (inelastic)
• Category width
• Availability of substitutes (substitutes to the produce available i.e. fudge have nougat as a substitute