Elasticity

Question 1

1. Elasticity

Answer 1

The degree to which the supply or demand curve reacts to a change in price is the curve’s elasticity

Question 2

2. Midpoint PED

Answer 2

(Q2-Q1)/[(Q2+Q1)/2]//(P2-P2)/[(P2+P1)/2]

Question 3

3. Inelastic demand

Answer 3

ep < 1 (price is larger than quantity on graph)

Question 4

4. Elastic demand

Answer 4

ep > 1 (price smaller than quantity on graph)

Question 5

5. Unitary Elastic

Answer 5

ep = 1

Question 6

6. Perfectly Elastic

Answer 6

ep = ∞

Question 7

7. Perfectly Inelastic

Answer 7

ep = 0

Question 8

8. Income elasticity of demand

Answer 8

refers to the responsiveness of the quantity demanded a certain good to a change in the real income of consumers who buy this good

Question 9

9. Inelastic demand affected by/components

Answer 9

few or no substitutes, necessity, small proportion spent on it, not able to delay purchase e.g petrol

Question 10

10. Elastic demand affected by/components

Answer 10

substitutes, luxuery, high proportion of income spend on the good, can be postponed or delayed e.g fridge or yacht

Question 11

11. Elastic

Answer 11

more than proportional change in QD when price changes
OR
Elastic goods are goods where the change in quantity demanded is proportionally greater than the change in price.

Question 12

12. Inelastic

Answer 12

a less than proportional change in QD when price changes

Question 13

13. anagram of factors that affect PED

Answer 13

P (proportion of income)
A (addictiveness)
N (necessity or luxury)
T (time period)
S (substitute)

Question 14

14. Normal

Answer 14

a product that a consumer will purchase more of as their income increases (positive co-efficient)

Question 15

15. Luxury

Answer 15

a product where there is more than a proportional increase in consumption when income increases

Question 16

16. Necessity

Answer 16

A product where there is less than a proportional increase in consumption as income rises. It is at some point likely to plateau

Question 17

17. Inferior

Answer 17

A product that a consumer will purchase less of (decreased demand) as their income increases

Question 18

18. Midpoint YED

Answer 18

(Q2-Q1)/[(Q2+Q1)/2]//(Y2-Y2)/[(Y2+Y1)/2]

Question 19

price elasticity

Answer 19

Price elasticity of demand measures the proportional responsiveness of the quantity demanded of a good/service to a change in its price.

Question 20

Cross elasticity

Answer 20

Cross elasticity of demand measures the proportional change in quantity demanded of one good to the change in price of another good.