week 2

Question 1

What is elasticity?

Answer 1

responsiveness of one variable to a change in another. (example: PED - responsiveness of demand to a change in price)

Question 2

measuring price elasticity of demand

Answer 2

• elastic demand X > 1
• inelastic demand X < 1
• unit elastic demand X = 1

Question 3

what are the determinants of price elasticity of demand

Answer 3

• the number of substitute goods
• the proportion of income spent on the good (the greater the proportion the larger the elasticity of demand)
• Time elapsed since the price change

Question 4

draw a diagram showing the total expenditure

Answer 4

Question 5

draw a diagram with elastic demand between two points

Answer 5

Question 6

draw a diagram with Inelastic demand between two points

Answer 6

Question 7

Draw a diagram with totally inelastic demand

Answer 7

Question 8

Draw a diagram with infinitely elastic demand

Answer 8

Question 9

Draw a diagram with unit elastic demand

Answer 9

Question 10

what is the income elasticity of demand

Answer 10

the sensitivity of demand for a certain good to a change in the real income of consumers who buy that good.

Question 11

what is the cross-price elasticity of demand

Answer 11

an economic concept that measures the responsiveness in the quantity demanded of one good when the price for another good changes

Question 12

what is the price elasticity of supply

Answer 12

A measurement of the change in demand for a good or service in relation to a change in its price

Question 13

Is demand elastic in the short run or long run?

Answer 13

Demand is elastic in the long run

Question 14

Is supply more elastic in the long run or short run

Answer 14

Supply is more elastic in the long run

Question 15

What is marginal utility theory

Answer 15

the added satisfaction that a consumer gets from having one more unit of a good or service

Question 16

what is utility

Answer 16

a term used to determine the worth or value of a good or service

Question 17

what is the total utility

Answer 17

The aggregate summation of satisfaction or fulfilment that a consumer receives through the consumption of goods or services

Question 18

What is consumer surplus

Answer 18

economic measurement of consumer benefits

Question 19

Rational consumer behaviour is where a person consumes the amount of a good that

Answer 19

minimises the amount spent on the good to achieve a given level of utility