5 Questions
Which of the following best describes price elasticity of demand?
The responsiveness of demand to changes in price
If the price of a product increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand?
-0.67
If the price elasticity of demand for a product is -2, what does this mean?
Demand is elastic
What does it mean if the price elasticity of demand is between 0 and -1?
Demand is inelastic
Which of the following is NOT one of the four basic types of elasticity?
Cross elasticity of demand
Study Notes
Price Elasticity of Demand
- Price elasticity of demand measures how responsive the quantity demanded of a product is to a change in its price.
- If the price of a product increases by 10% and the quantity demanded decreases by 15%, the price elasticity of demand is -1.5 (15%/10%).
Interpretation of Price Elasticity
- A price elasticity of demand of -2 means that for every 1% increase in price, the quantity demanded will decrease by 2%.
Degrees of Price Elasticity
- If the price elasticity of demand is between 0 and -1, demand is said to be inelastic, meaning that changes in price have a relatively small effect on the quantity demanded.
Types of Elasticity
- There are four basic types of elasticity: price elasticity of demand, price elasticity of supply, income elasticity of demand, and cross-price elasticity.
- One of the options is NOT a type of elasticity (this is the correct answer).
Test your knowledge on price, income, and cross elasticity with this quiz! Explore the concept of elasticity and learn how demand responds to changes in price. Discover the extent to which demand will change and measure your understanding of this important economic concept.
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