Vocab Quiz Elasticity

Question 1

PED

Answer 1

A measure of the responsiveness of the quantity demanded of a good or service to a change in its price

Question 2

Elastic demand

Answer 2

Where a change in the price of a good or service leads to a proportionately larger change in the quantity demanded of the good or service in the opposite direction. (PED is greater than one.)

Question 3

PES

Answer 3

A measure of the responsiveness of the quantity supplied of a good or service to a change in its price.

Question 4

Elastic supply

Answer 4

Where a change in the price of a good or service leads to a proportionately larger change in the quantity supplied of the good or service in the same direction. (PES is greater than one.)

Question 5

Inelastic demand

Answer 5

Where a change in the price of a good or service leads to a proportionately smaller change in the quantity demanded of the good or service in the opposite direction. (PED is less than one.)

Question 6

Inelastic supply

Answer 6

Where a change in the price of a good or service leads to a proportionately smaller change in the quantity supplied of the good or service in the same direction. (PES is less than one.)

Question 7

Unit Elastic Demand

Answer 7

Occurs when a change in the price of a good or service leads to an equal and opposite proportional change in the quantity demanded of the good or service (PED = 1).

Question 8

Unit Elastic Supply

Answer 8

Occurs when a change in the price of a good or service leads to an equal proportional change in the quantity supplied of the good or service (PES = 1).

Question 9

Primary commodities

Answer 9

Raw materials that are produced in the primary sector. Examples include agricultural products, metals and minerals.

Question 10

Income elasticity of demand (YED)

Answer 10

The responsiveness of demand for a good or service to a change in income.

Question 11

Normal Good

Answer 11

A good where the demand for it increases as income increases.

Question 12

Luxury Goods

Answer 12

Goods that are not considered essential by consumers therefore they have a price elastic demand (PED > 1), or income elastic demand (YED > 1).

Question 13

Inferior goods

Answer 13

Lower quality goods for which higher quality substitutes exist; if incomes rise, demand for the lower quality goods decreases.

Question 14

Primary Sector

Answer 14

Anything derived from the factor of production land. Includes agricultural products, metals and minerals.