price mechanism and application

Question 1

price elasticity of demand

Answer 1

the degree of responsiveness of quantity demanded due to a change in the price of the same good ceteris paribus

Question 2

PED >1

Answer 2

change in price causes a more than proportionate change in the quantity demanded, demand is price elastic

Question 3

PED<1

Answer 3

change in price causes a less than proportionate change in the quantity demanded, demand is price inelastic

Question 4

PED ( number and closeness of substitutes)

Answer 4

-the greater the number of substitutes and the closer the substitutes for the good, the more price elastic will be the demand for the good
- quantity demanded for the good to fall more than proportionately when price rises