Topic 4 - Pricing

Question 1

Elastic demand:

Answer 1

Pεd> 1

Question 2

Inelastic demand:

Answer 2

Pεd

Question 3

Unit elastic demand:

Answer 3

Pεd=1

Question 4

Determinants of price elasticity of demand:

Answer 4

1) Number of close substitutes
2) Proportion of income spent on good
3) Time period

Question 5

First Degree:

Answer 5

firm charges a different price to each consumer based on the maximum that they are will to pay.

• Examples: Ebay auctions, bazaar market stalls, accountants, lawyers, car dealers and architects.