Topic Six, Part 7 - Price Elasticity

Question 1

What is elasticity?

Answer 1

The responsiveness of demand to a change in price or income

Question 2

What is elastic demand?

Answer 2

An increase in price will greatly change demand

Question 3

What is inelastic demand?

Answer 3

An increase in price will barely change demand

Question 4

What is the formula for price elasticity for demand?

Answer 4

Change in quantity demanded / Change in price

Question 5

What does a PED of more than 1 mean?

Answer 5

Change in demand is more than change in price

Question 6

What does a PED of less than 1 mean?

Answer 6

Change in demand is less than change in price

Question 7

What does a PED 1 mean?

Answer 7

Change in demand is parallel to a change in price

Question 8

How does brand strength influence price elasticity demand?

Answer 8

Products with strong brand loyalty tend to be inelastic

Question 9

How does necessity influence price elasticity demand?

Answer 9

The higher the necessity, the more demand is inelastic

Question 10

How does habit influence price elasticity demand?

Answer 10

Products demanded as matter of habit tend to be inelastic

Question 11

How does availability of substitutes influence price elasticity demand?

Answer 11

Products with lots of alternatives tend to be price elastic

Question 12

How does time influence price elasticity demand?

Answer 12

Price changes have less impact in the short term