Price Elasticity of Demand: Understanding and Calculation

Play an AI-generated podcast conversation about this lesson

What does the Price Elasticity of Demand measure?

The responsiveness of quantity demanded to a change in price (correct)

The income elasticity of demand

The change in price of a good or service

The total revenue from a good or service

How is the Price Elasticity of Demand calculated?

By multiplying the percentage change in quantity demanded with the percentage change in price

By dividing the percentage change in quantity demanded by the percentage change in income

By adding the percentage change in quantity demanded to the percentage change in price

By dividing the percentage change in quantity demanded by the percentage change in price (correct)

Why is the Price Elasticity of Demand always expressed as a positive number?

To indicate that demand always increases with price

To avoid confusion

To focus on the absolute value of the responsiveness (correct)

To simplify calculations

How does elasticity affect demand analysis?

It makes demand analysis more useful Signup and view all the answers

What does the slope of a demand curve indicate?

The type of elasticity of demand Signup and view all the answers

What is the significance of substitution in determining elasticity of demand?

It affects the price elasticity of demand Signup and view all the answers

What is the formula to calculate the price elasticity of demand?

ED = %ΔP / %ΔQ Signup and view all the answers

When is demand considered to be unit elastic?

When ED = 1 Signup and view all the answers

What does it mean if demand is perfect inelastic?

Q does not respond at all to changes in price Signup and view all the answers

What makes demand more or less elastic according to the text?

The number of substitutes for the good and the time period being considered Signup and view all the answers

What is the most important determinant of price elasticity according to the text?

The number of substitutes for the good Signup and view all the answers

Which curve represents perfect elastic demand according to the text?

Curve P Q Signup and view all the answers

For non-durable goods, demand is more elastic over a long period relative to a short period because:

It is easier for consumers to substitute one good for another over a long period if the price changes Signup and view all the answers

What does it mean if a good has substitutes according to the text?

"A rise in the price of that good will cause the consumer to shift consumption to those substitute goods" Signup and view all the answers

"Elasticity is not the same as slope, but, the steeper a curve is at a given point, the less elastic demand." This statement implies that:

"The steeper the curve, the less elastic demand" Signup and view all the answers

What is the formula to calculate the price elasticity of demand?

Percentage change in quantity demanded divided by the percentage change in price Signup and view all the answers

When is demand considered to be unit elastic?

When the percentage change in quantity demanded is equal to the percentage change in price Signup and view all the answers

How does elasticity affect demand analysis?

Elasticity provides insights into how consumers respond to price changes Signup and view all the answers

What makes demand more or less elastic according to the text?

Availability of close substitutes and the necessity of the good Signup and view all the answers

"Elasticity is not the same as slope, but, the steeper a curve is at a given point, the less elastic demand." This statement implies that:

Higher prices lead to less elastic demand Signup and view all the answers

What does it mean if a good has substitutes according to the text?

There are alternatives available for that good Signup and view all the answers

What is the price elasticity of demand if the percentage change in quantity is greater than the percentage change in price?

Elastic demand Signup and view all the answers

What is the price elasticity of demand if the percentage change in quantity is less than the percentage change in price?

Inelastic demand Signup and view all the answers

When is demand considered to be unit elastic?

When the percentage change in quantity equals the percentage change in price Signup and view all the answers

What is demand considered to be if the quantity does not respond at all to changes in price?

Perfectly inelastic demand Signup and view all the answers

What is demand considered to be if the quantity responds enormously to changes in price?

Perfectly elastic demand Signup and view all the answers

According to the text, what makes demand more or less elastic?

The number of substitutes for the good Signup and view all the answers

Why is demand more elastic over a long period relative to a short period for non-durable goods?

Because consumers can easily substitute one good for another over a long period Signup and view all the answers

Why is the demand for products like salt considered quite inelastic?

Because consumers do not consider the price while buying such products Signup and view all the answers

What does the slope of a demand curve indicate according to the text?

The responsiveness of quantity demanded to changes in price Signup and view all the answers

What does substitution have the most significant impact on, according to the text?

The number of substitutes for the good Signup and view all the answers

Price Elasticity of Demand: Understanding and Calculation

Choose a study mode

Podcast

Questions and Answers

What does the Price Elasticity of Demand measure?

How is the Price Elasticity of Demand calculated?

Why is the Price Elasticity of Demand always expressed as a positive number?

How does elasticity affect demand analysis?

What does the slope of a demand curve indicate?

What is the significance of substitution in determining elasticity of demand?

What is the formula to calculate the price elasticity of demand?

When is demand considered to be unit elastic?

What does it mean if demand is perfect inelastic?

What makes demand more or less elastic according to the text?

What is the most important determinant of price elasticity according to the text?

Which curve represents perfect elastic demand according to the text?

For non-durable goods, demand is more elastic over a long period relative to a short period because:

What does it mean if a good has substitutes according to the text?

"Elasticity is not the same as slope, but, the steeper a curve is at a given point, the less elastic demand." This statement implies that:

What is the formula to calculate the price elasticity of demand?

When is demand considered to be unit elastic?

How does elasticity affect demand analysis?

What makes demand more or less elastic according to the text?

"Elasticity is not the same as slope, but, the steeper a curve is at a given point, the less elastic demand." This statement implies that:

What does it mean if a good has substitutes according to the text?

What is the price elasticity of demand if the percentage change in quantity is greater than the percentage change in price?

What is the price elasticity of demand if the percentage change in quantity is less than the percentage change in price?

When is demand considered to be unit elastic?

What is demand considered to be if the quantity does not respond at all to changes in price?

What is demand considered to be if the quantity responds enormously to changes in price?

According to the text, what makes demand more or less elastic?

Why is demand more elastic over a long period relative to a short period for non-durable goods?

Why is the demand for products like salt considered quite inelastic?

What does the slope of a demand curve indicate according to the text?

What does substitution have the most significant impact on, according to the text?

More Like This

Elasticity of Supply

Price Elasticity of Supply

Price Elasticity of Supply

3rd Semester Economics: Microeconomics Concepts