Theme 1 Task 8: Price Elasticity of Demand

Calculate the price elasticity of demand for an MP3 player if its price rises by 10% and the quantity demanded for the MP3 player falls by 10%.

• +1

• 0

• -1

• +0.5

• -0.5

Calculate the price elasticity of demand for a good if its price falls by 16% and the quantity demanded rises by 8%.

• +1

• 0

• -1

• +0.5

• -0.5

What does a PED of -1 suggest about the price elasticity of demand?

• Perfectly price inelastic

• Relatively price inelastic

• Unitary

• Relatively price elastic

• Perfectly price elastic

What does a PED of -0.5 suggest about the price elasticity of demand?

• Perfectly price inelastic

• Relatively price inelastic

• Unitary

• Relatively price elastic

• Perfectly price elastic

Julia raises the price of her designer shirts from £50 to £55. She knows the price elasticity of demand is -6. Calculate the percentage change in the quantity demanded of her shirts.

• -60%

• +60%

• -40%

• +40%

• +50%

What does a PED of -6 suggest about the price elasticity of demand?

• Perfectly price inelastic

• Relatively price inelastic

• Unitary

• Relatively price elastic

• Perfectly price elastic

Tommy raises the price of his coffee from £1.00 to £1.25. If the price elasticity of demand is -2. Calculate the percentage change in the quantity demanded for his coffee.

• -60%

• +60%

• -50%

• +40%

• +50%

What does a PED of -2 suggest about the price elasticity of demand?

• Perfectly price inelastic

• Relatively price inelastic

• Unitary

• Relatively price elastic

• Perfectly price elastic

Billy and Joanna know that the price elasticity of demand for the new hair conditioner that they are marketing is -4. They want to raise their sales by 20%. What do they need to do to the price of their hair conditioner?

• Cut price by 5%

• Raise price by 5%

• Cut price by 80%

• Raise price by 80%

Sophie is a garage mechanic and she raises the price of an annual car service from £80 to £100 and as a result sales fall from 40 to 36 cars per month. Calculate the price elasticity of demand for annual car services.

• -0.4

• -0.2

• -0.3

• -0.5