Econs - 2.7, 2.8

Question 1

PED - definition

Answer 1

measures the extent to which demand for a product changes due to a change in its price

Question 2

price inelastic demand

Answer 2

• unresponsive
• price changes = no effect
• “need”

Question 3

price elastic demand

Answer 3

• responsive
• price changes = effect
• “want”

Question 4

interpreting price elasticity equation
(1) price inelastic
(2) price elastic
(3) perfectly price inelastic
(4) perfectly price elastic
(5) unitary price elasticity

Answer 4

(1) price inelastic = <1
(2) price elastic = >1
(3) perfectly price inelastic = ∞
(4) perfectly price elastic = 0
(5) unitary price elasticity = 1

*angle of line depends on demand / supply

Question 5

determinants of price elasticity of demand (4, THIS)

Answer 5

Time
Habits, fashion, tastes
Income
Substitutes

Question 6

PES - definition

Answer 6

measures the degree of responsiveness of the quantity supplied of a product following a change in its price

Question 7

PES - definition

Answer 7

measures the degree of responsiveness of the quantity supplied of a product following a change in its price

Question 8

PES - easy memorise

Answer 8

how fast producers can change the amt supplied based on the market

Question 9

price inelastic supply

Answer 9

• producers take a long time or find it difficult to change supply when price change

Question 10

price elastic supply

Answer 10

• producers can quickly increase supply when price changes

Question 11

price inelastic supply

Answer 11

• producers take a long time or find it difficult to change supply when price changes

Question 12

determinants of price elasticity of supply (4)

Answer 12

1. time
2. storage
3. raw materials
4. mobility of factors