Price Elasticity & Sensitivity Concepts
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Questions and Answers

What does it mean for a product to be unit elastic?

  • The quantity demanded changes proportionally to the price change. (correct)
  • The price of the product increases while demand remains the same.
  • The price of the product changes but total revenue stays constant.
  • The product has many substitutes available in the market.

    • Why is Tesco's bread considered price elastic?

  • It is a necessity for daily life.
  • The demand remains constant regardless of price changes.
  • It has weak substitutes in the market.
  • There are many alternative bread options available. (correct)

    • What makes petrol an inelastic product?

  • The demand remains constant even with price changes. (correct)
  • The price increases lead to a decrease in demand.
  • There are strong substitutes like public transport available.
  • It is a luxury rather than a necessity.

    • Which product category would likely experience the least impact on sales if the price is increased significantly?

    <p>Petrol</p> Signup and view all the answers

    How does the concept of price elasticity relate to total revenue?

    <p>Total revenue changes based on price sensitivity and demand changes.</p> Signup and view all the answers

    Why can bananas be considered unit elastic?

    <p>The quantity of bananas consumed increases with price reductions.</p> Signup and view all the answers

    What impact does having many substitutes have on a product's price elasticity?

    <p>Increases price elasticity</p> Signup and view all the answers

    How does the concept of unit elastic differ from elastic or inelastic products?

    <p>Unit elastic products see proportional changes in quantity demanded.</p> Signup and view all the answers

    Why do people continue to buy petrol even when its price increases?

    <p>As petrol is a necessity and has very weak substitutes</p> Signup and view all the answers

    What does a unit elastic product imply about the relationship between price and quantity demanded?

    <p>Price and quantity demanded change proportionally</p> Signup and view all the answers

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