Topic 5

Question 1

Elastic

Answer 1

change in price produces BIG change in demand

Question 2

Inlelastic

Answer 2

change in price produces SMALL change in demand

Question 3

Horizontal line represents

Answer 3

more elastic

Question 4

Price elasticity of demand

Answer 4

measure of responsiveness of the quantity demanded of a good to the change in the price of that good

Question 5

price elasticity of demand formula

Answer 5

%change in quantity demanded / %change in price

%change = new price - initial/ initial

Question 6

midpoint formula

Answer 6

%change = new - initial / average

Question 7

Elasticity scale

Answer 7

Pe > 1 = elastic
Pe < 1 = inelastic
always absolute value
if Pe = 1 it is unit elasticity

Question 8

perfect inelastic demand curve

Answer 8

perfect vertical line

Question 9

perfect elastic demand

Answer 9

perfect horizontal line

Question 10

why do some goods have high elasticity compared to a low elasticity

Answer 10

availability of close substitutes (more subs + more elastic)
necessities versus luxuries
definition of the market
time horizon (may not be able to change spending habits quickly)