Unit 9

Question 1

Define elastic demand.

Answer 1

Elastic demand is where the price elasticity of demand is greater than 1. This means that a proportional or percentage change in the price of the product will lead to a proportionally larger change in demand.

Question 2

When is demand perfectly elastic?

Answer 2

Demand is perfectly elastic if the price elasticity of demand is infinity.

Question 3

Define inelastic demand.

Answer 3

Inelastic demand is where the price elasticity of demand is less than 1. This means that a percentage or proportional change in the price of the product will lead to a proportionally smaller change in demand for the product.

Question 4

What is price elasticity of demand?

Answer 4

Price elasticity of demand is a measure of the responsiveness or sensitivity of the demand for a product to a change in the price of the product.

Question 5

What is the formula for PED?

Answer 5

P/Qd x Change in QD/Change in price

Question 6

What is unitary elasticity?

Answer 6

Unitary elasticity is where the value of price elasticity of demand is one. This means that a proportional or percentage change in the price of a product will lead to a change in demand which is proportionally equal.

Question 7

Define total expenditure.

Answer 7

Total expenditure is the quantity bought multiplied by the average price of the product.

Question 8

Define total revenue.

Answer 8

Total revenue is the quantity sold multiplied by the average price of the product.