week 04: Price Elasticity of Demand

Question 1

If the price elascity is below one then?

Answer 1

It is inelastic

Question 2

If the price elascity is above one then?

Answer 2

It is elastic

Question 3

If the price Elascity is equal to one then?

Answer 3

Unitary elastic

Question 4

If the Price elascity is equal to 0 then?

Answer 4

It is perfectly inelastic

Question 5

What are the determinats of pricce elasticity demand?

Answer 5

1. Substitues
2. Time frame
3. Share of budget on a product

Question 6

How do subsitutes in the market affect price elasticity?

Answer 6

Many Subsitutes= More elascity
Fewere subsitutes= Less elasticity

Question 7

How does timeframe affect Elasticity?

Answer 7

Longer timeframe= More elastic (More senstive to price changes in the long run)
Shorter tiimegrame= Less elastic

Question 8

How does share of budget on a product affect price elasticity?

Answer 8

larger share= Demand is elastic
Smaller share= Demand in inelastic

Question 9

If there is a graph look at the shape+direction of the line

If total revenue decreases?

Answer 9

Demand is elastic

Question 10

If there is a graph look at the shape+ direction of the line.

If total revenue increases?

Answer 10

Demand in inelastic

Question 11

If total revenue does not change?

Answer 11

Demand is unitary elastic

The graph would be curved, hence unitary elasticity

Question 12

How to calculate total revenue?

Answer 12

Price x Quantity

Question 13

How do we use the midpoint method to calculate price elasticity of demand?

Write answer out

Answer 13

Refer to mindmap for answer

Question 14

What is price elasticity of demand?

Answer 14

It measures the responsivness of customers to a change in price