5 Questions
Which of the following is true about price elasticity of demand?
A 10% increase in price will result in a decrease in demand by less than 10%.
What does elasticity measure?
The extent to which demand will change.
Which of the following is true about the relationship between price and demand when the price elasticity of demand is between 0 and -1?
The relationship is inelastic.
What does the formula for price elasticity of demand represent?
The percentage change in price divided by the percentage change in quantity demanded.
Which of the following is true about the relationship between price and demand when the price elasticity of demand is between -1 and infinity?
The relationship is elastic.
Study Notes
Price Elasticity of Demand
- Price elasticity of demand measures how responsive the quantity of a good or service demanded is to a change in its price or other influential factors.
- Elasticity measures the responsiveness of one variable to changes in another variable.
Price and Demand Relationship
- When the price elasticity of demand is between 0 and -1, a small percentage change in price will result in a smaller percentage change in demand, and demand is inelastic.
- When the price elasticity of demand is between -1 and infinity, a small percentage change in price will result in a larger percentage change in demand, and demand is elastic.
Formula for Price Elasticity of Demand
- The formula for price elasticity of demand represents the percentage change in quantity demanded in response to a 1% change in price.
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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