Th1.2: Price, Income and XED

Question 1

PED definition:

Answer 1

the responsiveness of quantity demanded to a change in price

Question 2

PED formula:

Answer 2

% change in P

Question 3

What is the PED when PED = 1

Answer 3

unitary elastic

Question 4

What is the PED when PED > 1?

Answer 4

relatively elastic

Question 5

What is the PED when PED < 1?

Answer 5

relatively inelastic

Question 6

What is the PED when PED = infinity?

Answer 6

perfectly elastic

Question 7

What is the PED when PED = 0

Answer 7

perfectly inelastic

Question 8

What does unitary elastic mean?

Answer 8

quantity demanded changes by exactly the same percentage as price

Question 9

What does relatively elastic mean and look like?

Answer 9

quantity demanded changes by a larger percentage than price so demand is relatively responsive to price

Question 10

What does relatively inelastic mean?

Answer 10

quantity demanded changes by a smaller percentage than price so demand is relatively unresponsive to price

Question 11

What does perfectly elastic mean?

Answer 11

a change in price means that quantity falls to 0 and demand is very responsive to pricee

Question 12

What does perfectly inelastic mean?

Answer 12

a change in price has no effect on output so demand is completely unresponsive to price

Question 13

What does unitary elastic PED curve look like?

Answer 13

a reciprocal curve

Question 14

What does the relatively elastic PED curve look like?

Answer 14

a more sloping curve

Question 15

What does the relatively inelastic PED curve look like?

Answer 15

a steep curve

Question 16

What does the perfectly elastic PED curve look like?

Answer 16

a horizontal line

Question 17

What does the perfectly inelastic PED curve look like?

Answer 17

a vertical line