Elasticity for Students Today

What does the Price Elasticity of Demand (PED) formula measure?

• The percentage change in quantity demanded divided by the percentage change in price.
• The total revenue of a firm.
• The price change of a good.
• The percentage change in income.

If the calculated PED is greater than 1, how would you describe the demand?

• Elastic
• Inelastic
• Unitary elastic
• Perfectly elastic

A PED result of -0.5 suggests:

• Elastic demand
• Inelastic demand
• Unitary elastic demand
• Perfectly inelastic demand

When calculating PED, what does a negative result typically indicate?

• The good is a luxury.
• The good is a necessity.
• The inverse relationship between price and quantity demanded.
• An error in calculation.

If PED is equal to 1, the demand is considered:

• Elastic
• Inelastic
• Unitary elastic
• Perfectly elastic

 How would you interpret a PED result of -2?

• A 1% increase in price leads to a 2% decrease in quantity demanded.
• A 2% increase in price leads to a 1% decrease in quantity demanded.
• A 2% increase in price leads to a 2% decrease in quantity demanded.
• A 2% increase in price leads to a 4% decrease in quantity demanded.

What is the significance of PED in decision-making for producers?

• Determines the level of competition in the market.
• Helps in setting optimal pricing strategies.
• Measures consumer income.
• Predicts future market trends.

If a 10% decrease in price results in a 15% increase in quantity demanded, what is the PED?

• 1.5
• -1.5
• 0.67
• -0.67

Why is it important for businesses to understand PED?

• To maximize profits by setting appropriate prices.
• To minimize costs of production.
• To determine the total market demand.
• To comply with government regulations.

In terms of responsiveness to price changes, what characterizes an elastic demand?

• Quantity demanded changes significantly with a small change in price.
• Quantity demanded changes minimally with a large change in price.
• Quantity demanded remains constant regardless of price changes.
• Quantity demanded is not related to price.