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Price Elasticity of Demand Quiz

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Questions and Answers

What does the price elasticity of demand measure?

Responsiveness of quantity demanded to a change in price (correct)

Total revenue from a change in price

Total quantity demanded at a specific price

Responsiveness of price to a change in quantity demanded

In the equation for price elasticity of demand (PEd), what is on the top and bottom?

Total revenue on the top, quantity demanded on the bottom

Total revenue on the top, price on the bottom

Price on the top, quantity demanded on the bottom

Quantity demanded on the top, price on the bottom (correct)

What happens to quantity demanded when the price goes up, according to the basic law of demand?

Quantity demanded will decrease (correct)

Quantity demanded will increase

Quantity demanded will remain the same

Quantity demanded will fluctuate

What does the equation PV = (Percentage change in quantity demanded) / (Percentage change in price) represent?

Price elasticity of demand Signup and view all the answers

Why is it important to remember the order in the price elasticity of demand equation?

To ensure the correct interpretation of the measure Signup and view all the answers

What is the definition of price elasticity of demand (PEd)?

The price elasticity of demand (PEd) measures the responsiveness of quantity demanded given a change in price. Signup and view all the answers

What does the equation for price elasticity of demand (PEd) represent?

The equation for price elasticity of demand (PEd) represents the percentage change in quantity demanded over the percentage change in price, calculated as: $PEd = rac{ ext{Percentage change in quantity demanded}}{ ext{Percentage change in price}}$. Signup and view all the answers

Why is it important to remember the order in the price elasticity of demand equation?

It is important to remember the order in the price elasticity of demand equation because quantity demanded is on the top and price is on the bottom in the equation. Remembering this order ensures the correct interpretation of the calculated price elasticity of demand. Signup and view all the answers

What does the basic law of demand state?

The basic law of demand states that when the price goes up, quantity demanded will decrease, and when the price goes down, quantity demanded will increase. Signup and view all the answers

What important information does the price elasticity of demand provide?

The price elasticity of demand provides important information about the responsiveness of quantity demanded to changes in price, which helps in understanding consumer behavior and market dynamics. Signup and view all the answers

Study Notes

Price Elasticity of Demand

Measures the responsiveness of the quantity demanded of a good to a change in its price.
Equation: PEd = (Percentage change in quantity demanded) / (Percentage change in price)
Top: Percentage change in quantity demanded
Bottom: Percentage change in price

Law of Demand

When the price goes up, quantity demanded decreases.
States that as the price of a good increases, the quantity demanded of it decreases, ceteris paribus.

Importance of Price Elasticity of Demand

Provides important information about how consumers respond to changes in price.
Helps businesses and policymakers understand the potential impact of price changes on demand.

Key Notes

Remembering the order in the price elasticity of demand equation is important to avoid incorrect calculations.
The definition of price elasticity of demand is a measure of how responsive the quantity demanded of a good is to a change in its price.

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Description

Test your knowledge of price elasticity of demand with this quiz. Challenge yourself to understand how changes in price impact the quantity demanded and measure the responsiveness of consumers.