Microeconomics Lecture: Price Elasticity of Demand and Supply

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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?

The time period involved (D) Signup and view all the answers

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

Elastic (B) 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?

Price elasticity of demand (C) Signup and view all the answers

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

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

What is the difference between point elasticity and arc elasticity?

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) Signup and view all the answers

What is the income elasticity of demand?

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

What is the cross-price elasticity of demand?

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

What is the price elasticity of supply?

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

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

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

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

The availability of close substitutes (B) 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?

Price inelastic (B) Signup and view all the answers

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

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

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

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) Signup and view all the answers

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

All of the above (D) Signup and view all the answers

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

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) Signup and view all the answers