Microeconomics Lecture: Price Elasticity of Demand and Supply

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Questions and Answers

What is the primary reason why the price elasticity of demand for holidays in Greece is likely to be high?

  • People need a holiday to cope with the rest of the year.
  • Holidays at home are a reasonable alternative.
  • People tend to book their holidays a long time in advance.
  • There are plenty of different holiday destinations to choose from. (correct)

Which of the following types of elasticity has an elasticity of demand equal to 0?

  • Elastic
  • Perfectly inelastic (correct)
  • Perfectly elastic
  • Inelastic

What measures how much the quantity demanded of a good responds to a change in consumers' income?

  • Income elasticity of demand (correct)
  • Supply elasticity
  • Cross-price elasticity
  • Price elasticity of demand

Which determinant of elasticity is related to the time frame in which the demand is being measured?

<p>The time period involved (D)</p> Signup and view all the answers

What type of elasticity has an elasticity of demand exceeding 1?

<p>Elastic (B)</p> Signup and view all the answers

What is the term for the measure of how responsive the quantity demanded of a good is to a change in its price?

<p>Price elasticity of demand (C)</p> Signup and view all the answers

What is the main purpose of the concept of elasticity in supply and demand analysis?

<p>To measure the responsiveness of buyers and sellers to changes in market conditions (A)</p> Signup and view all the answers

What is the difference between point elasticity and arc elasticity?

<p>Point elasticity measures the elasticity of demand at a single point, while arc elasticity measures the elasticity of demand over a range of prices (D)</p> Signup and view all the answers

What is the income elasticity of demand?

<p>A measure of how much the quantity demanded of a good responds to a change in the income of consumers (A)</p> Signup and view all the answers

What is the cross-price elasticity of demand?

<p>A measure of how much the quantity demanded of a good responds to a change in the price of another good (B)</p> Signup and view all the answers

What is the price elasticity of supply?

<p>A measure of how much the quantity supplied of a good responds to a change in the price of that good (D)</p> Signup and view all the answers

What is the main determinant of the price elasticity of demand?

<p>The responsiveness of buyers to changes in market conditions (B)</p> Signup and view all the answers

What is the primary factor that determines the price elasticity of demand?

<p>The availability of close substitutes (B)</p> Signup and view all the answers

Which type of elasticity of demand is characterized by a proportionate change in quantity demanded that is less than the proportionate change in price?

<p>Price inelastic (B)</p> Signup and view all the answers

What is the formula for computing the price elasticity of demand?

<p>PEd = (ΔQ / Q) / (ΔP / P) (B)</p> Signup and view all the answers

What is the difference between a negative and a positive price elasticity of demand?

<p>A negative price elasticity of demand indicates a downward sloping demand curve, while a positive price elasticity of demand indicates an upward sloping demand curve (C)</p> Signup and view all the answers

Which of the following is an application of elasticity of demand?

<p>All of the above (D)</p> Signup and view all the answers

What is the difference between price elasticity of demand and price elasticity of supply?

<p>Price elasticity of demand refers to the responsiveness of quantity demanded to a change in price, while price elasticity of supply refers to the responsiveness of quantity supplied to a change in price (A)</p> Signup and view all the answers

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