Determinants of PED

What is one of the key determinants of price elasticity of demand?

• The size of the market

• The level of income

• The number of substitutes

• The advertising budget

Price elasticity of demand tends to be higher when:

• There are fewer close substitutes

• Consumers have more time to adjust

• The product is a luxury item

• The market is saturated with similar products

In general, if a good is considered a necessity, its price elasticity of demand is:

• Inelastic

• Elastic

• Highly responsive

• Perfectly elastic

If the demand for a good is inelastic, a price increase will lead to:

• A small decrease in quantity demanded

• A large decrease in quantity demanded

• No change in quantity demanded

• An increase in quantity demanded

Elasticity is higher when the time period for adjustment is:

• Short

• Long

• Irrelevant

• Constant

If a good has many substitutes, its price elasticity of demand is likely to be:

• Inelastic

• Elastic

• Highly responsive

• Perfectly elastic

Luxury goods often have:

• Highly elastic demand

• Highly inelastic demand

• Responsive demand

• Perfectly elastic demand

When demand is elastic, a decrease in price will result in:

• A decrease in quantity demanded

• No change in quantity demanded

• An increase in quantity demanded

• Perfectly elastic demand

Which factor is least likely to affect the price elasticity of demand?

• Availability of substitutes

• Necessity or luxury status

• Advertising efforts

• Market demand

Inelastic demand implies that consumers:

• Are very responsive to price changes

• Are not very responsive to price changes

• Have limited choices

• Have perfectly elastic demand