Grade 8 [Week 5 Economics Review]

What does Price Elasticity of Demand measure?

• amount of Qd of a product compared to its substitutes

• degree responsiveness of the Qd of a product following a change in its price

• degree responsiveness of the Qd of a product following a change in its competitors' price

• customers' willingness to pay a product at a certain price level

Which of the following is NOT the characteristic of a price inelastic product?

• Fewer substitute products

• may be categorised as a luxurious item, e.g. diamond

• the product does not have a strong consumer because it is most likely new in the market

• considered as a basic necessity or basic need

Which of the following is the characteristic of a price inelastic product? (answer can be more than 1)

• 
• many substitutes

• considered as basic necessities

• Not a new business or it is an existing business that have run for a little while

Which of the following are the characteristics of a price elastic product?

• there is a relatively large change in the Qd when the there are changes in price.

• May be new in a very competitive market

• many substitute products

• many complementary products

Which of the following are the reasons why biofuels are considered to be price elastic?

• Its main competitor is fossil fuels which people much more prefer than biofuels due to its lower level selling price.

• The production cost (money to make the product) is higher compared to fossil fuels

• the product has much more economical benefits compared to fossil fuels therefore it has become the customers' main option

• It has many substitutes other than fossil fuels which threaten its position in the fuels industry