Unit 2.5-2.6: Elasticity

Price elasticity of demand can be described as _________

• The responsiveness of demand to changes in supply

• The responsiveness of price to changes in demand

• The responsiveness of demand to changes in price

• The responsiveness of quantity demanded to changes in price

Price elasticity of supply can be described as _______

• The responsiveness of price to changes in supply

• The responsiveness of supply to changes in demand

• The responsiveness of quantity supplied to changes in price

• The responsiveness of supply to changes in price

In a market the quantity supplied of a good or service is unaffected by changes in the price of the product. It follows that the PES of the good or service is _________

• Perfectly elastic

• Unitary

• Perfectly inelastic

• Highly elastic

Goods and services which are perfectly elastic have a PES of ___________

• Xero

• Greater than 1

• 1

• Infinity

The following demand and supply curve represents the market for

• Tickets for a football stadium

• A super luxury good

• A good with perfectly elastic supply

• Speculative products such as luxury property in Central London

Income elasticity of demand (YED) is ______________

• The responsiveness of income to changes in demand

• The responsiveness of quantity demand to changes in income

• The responsiveness of demand to changes in income

• The responsiveness of income to changes in quantity demanded

When an individuals monthly income rises from $500 to $1,000 their demand for a product falls from 100 units sold to 90. Calculate the YED elasticity of this good?

• -0.1

• -1

• 1

• -10

When an individuals monthly income rises from $500 to $1,000 their demand for a product rises from 50 units sold to 90. Calculate the elasticity of this good?

• 2

• 8

• 0.2

• 0.8

Complete the following sentence: Goods and services with a YED value > 1 are ______ as the % change in demand is _____________ than the % change in income.

• Inelastic, greater

• Elastic, smaller

• Elastic, greater

• Inelastic, smaller

Complete the following sentence: Goods and services with a YED value < 1 are ______ as the % change in demand is _____________ than the % change in income.

• Elastic, lower

• Unitary, greater

• Elastic, equal

• Inelastic, lower