9 Questions
What does the Price Elasticity of Demand measure?
Responsiveness of sales to change in price
If the quantity demanded before a price change is 2000 and after the price change is 2500, what is the percentage change in quantity demanded?
15%
When computing Price Elasticity of Demand, what would a negative elasticity value indicate?
Inelastic demand
What does Cross Elasticity of Demand measure?
Responsiveness of one commodity to change in the price of another commodity
Using the Total Revenue Test, when is demand considered elastic?
When total revenue decreases as price decreases
If the quantity demanded falls by 10% when price increases by 5%, what is the Price Elasticity of Demand?
-2
What happens to Total Revenue if demand is inelastic and price decreases?
Total Revenue increases
How does an increase in consumer income affect the demand for normal goods?
Increases demand for normal goods
'If two goods are complements, what happens to the cross price elasticity between them?'
'It becomes negative'
Practice calculating a firm's revenue at different prices and determining demand elasticity using the total-revenue test. In this example problem, learn how to analyze changes in quantity sold and total revenue to determine whether demand is elastic or inelastic.
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