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Questions and Answers
Elasticity measures the responsiveness of quantity demanded or supplied to changes in one of its determinants.
Elasticity measures the responsiveness of quantity demanded or supplied to changes in one of its determinants.
True
The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price.
The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price.
True
A good with many close substitutes typically has a lower price elasticity of demand.
A good with many close substitutes typically has a lower price elasticity of demand.
False
Luxuries generally have higher price elasticity of demand compared to necessities.
Luxuries generally have higher price elasticity of demand compared to necessities.
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The price elasticity of demand is generally higher in the short run than in the long run.
The price elasticity of demand is generally higher in the short run than in the long run.
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Price elasticity of demand can be calculated as the percentage change in quantity demanded divided by the percentage change in price.
Price elasticity of demand can be calculated as the percentage change in quantity demanded divided by the percentage change in price.
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If the price of a product increases by 20% and the quantity demanded decreases by 15%, the price elasticity of demand is 1.33.
If the price of a product increases by 20% and the quantity demanded decreases by 15%, the price elasticity of demand is 1.33.
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If a good has a price elasticity of demand greater than 1, demand for that good is considered elastic.
If a good has a price elasticity of demand greater than 1, demand for that good is considered elastic.
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Price elasticity of demand tends to be higher for narrowly defined goods than for broadly defined goods.
Price elasticity of demand tends to be higher for narrowly defined goods than for broadly defined goods.
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Goods that are necessities typically have higher price elasticity of demand compared to luxuries.
Goods that are necessities typically have higher price elasticity of demand compared to luxuries.
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Study Notes
Elasticity
- Elasticity is a measurement of how quantity demanded or supplied reacts to changes in a determinant factor.
- The price elasticity of demand measures how quantity demanded changes due to price change.
- Goods with multiple substitutes generally have a lower price elasticity of demand.
- Luxury goods typically have a higher price elasticity of demand than necessities.
- Price elasticity of demand is generally higher in the short term compared to the long term.
- Calculating price elasticity of demand involves dividing the percentage change in quantity demanded by the percentage change in price.
- For example, if a 20% price increase leads to a 15% decrease in quantity demanded, the price elasticity of demand is 1.33.
- A price elasticity of demand exceeding 1 indicates an elastic demand for the good.
- Price elasticity of demand tends to be higher for narrowly defined goods compared to broader categories.
- Necessities generally have lower price elasticity of demand than luxuries.
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Description
Explore the concept of elasticity in economics through this quiz. Understand how changes in determinants affect the quantity demanded or supplied. Test your knowledge on this essential economic principle and its applications.
