Week 7 - PED

Question 1

What is the definition of price elasticity of demand?

Answer 1

The sensitivity of demand to changes in price

Question 2

Give the formula for PED

Answer 2

%∆𝑄𝑑 ÷ %∆𝑃

Question 3

What is meant by ‘price elastic demand’?

Answer 3

Demand is very sensitive to price - the % change in demand will be bigger than the % change in price

Question 4

What values would constitute ‘price elastic demand’?

Answer 4

-1 to -∞

Question 5

Draw a price elastic demand curve

Answer 5

Flatter curve

Question 6

What is meant by ‘perfectly price elastic demand’?

Answer 6

If we increase price by even 1%, we lose all demand

Question 7

What values would constitute ‘perfectly elastic demand’?

Answer 7

-∞

Question 8

Draw a perfectly elastic demand curve

Answer 8

Horizontal

Question 9

What is meant by ‘price inelastic demand’?

Answer 9

Demand is not very sensitive to price - the % change in demand will be smaller than the % change in price

Question 10

What values would constitute ‘price inelastic demand’?

Answer 10

0 to -1

Question 11

Draw a price inelastic demand curve

Answer 11

Steep curve