Price Elasticity of Demand Quiz

Price elasticity is calculated as the percentage change in quantity demanded divided by the percentage change in price. A value of -2 indicates that a one percent price rise leads to a two percent decline in quantity demanded.

If a good is said to have an elasticity of 2, it almost always means that the good has an elasticity of -2 according to the formal definition. Price elasticities are usually negative except in special cases.

Price elasticity of demand (PED) measures how sensitive the quantity demanded is to its price. It gives the percentage change in quantity demanded when there is a one percent increase in price, holding everything else constant.

<p>The phrase 'more elastic' means that a good's elasticity has greater magnitude, ignoring the sign.</p> Signup and view all the answers

<p>The price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price. It indicates the percentage change in quantity demanded when there is a one percent increase in price, holding other factors constant. A PED of -2 means a 1% price rise leads to a 2% decline in quantity demanded.</p> Signup and view all the answers

<p>A price elasticity of -2 means that a 1% increase in price leads to a 2% decrease in quantity demanded. This indicates that the good is relatively sensitive to price changes, leading to a larger reduction in quantity demanded.</p> Signup and view all the answers

<p>Veblen and Giffen goods are two special cases that are exceptions to the general rule of price elasticities being negative. They are related to price elasticity in the sense that they demonstrate unique behavior in response to price changes.</p> Signup and view all the answers

<p>The term 'more elastic' refers to goods with a greater magnitude of elasticity, ignoring the sign. It signifies a higher sensitivity to price changes, leading to a larger percentage change in quantity demanded.</p> Signup and view all the answers

<p>Income elasticity of demand measures how the quantity demanded changes with consumer income. It is one of the other elasticities that measures the responsiveness of demand to changes in income, unlike price elasticity which measures demand sensitivity to price changes.</p> Signup and view all the answers

<p>Veblen and Giffen goods are two special cases in economics. Veblen goods are luxury goods for which demand increases as the price rises, defying the law of demand. Giffen goods are inferior goods for which demand increases when the price rises due to income effects. These goods challenge the typical negative price elasticities observed for most goods.</p> Signup and view all the answers