AQA Economics AS Microeconomics Price Elasticity of Demand
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AQA Economics AS Microeconomics Price Elasticity of Demand

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Questions and Answers

Which type of goods have a Cross-Price Elasticity of Demand (XED) equal to zero?

  • Substitute goods
  • Unrelated goods (correct)
  • Inferior goods
  • Complementary goods

    • What happens to the Quantity Demanded (QD) of good Y if the price of a weak complement good X falls significantly?

  • No change in QD of Y
  • Large increase in QD of Y
  • Decrease in QD of Y
  • Small increase in QD of Y (correct)

    • Why are firms interested in understanding Cross-Price Elasticity of Demand (XED)?

  • To assess the impact of their advertising campaigns
  • To predict future demand trends accurately
  • To monitor their production costs
  • To determine how many competitors they have (correct)

    • Which situation describes close substitutes?

    <p>Small increase in the price of X leads to a large increase in QD of Y</p> Signup and view all the answers

    In the context of substitutes, what does an upward-sloping demand curve indicate?

    <p>Positive Cross-Price Elasticity of Demand (XED)</p> Signup and view all the answers

    What is the price elasticity of demand (PED) for a price elastic good?

    <p>Greater than 1</p> Signup and view all the answers

    In the context of luxury goods, what does a YED greater than 1 indicate?

    <p>Demand increases more than proportionately with an increase in income</p> Signup and view all the answers

    What does a price inelastic good signify?

    <p>The demand is relatively unresponsive to a change in price</p> Signup and view all the answers

    When two goods are complements, what does a negative cross elasticity of demand (XED) indicate?

    <p>Increase in the price of one good leads to a decrease in demand for the other</p> Signup and view all the answers

    What is the significance of a YED less than 1 for a normal good?

    <p>The good is inferior</p> Signup and view all the answers

    For close complements, what happens when the price of one good decreases?

    <p>Quantity demanded for one good increases and the other decreases</p> Signup and view all the answers

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