Price Elasticity of Demand (PED)

Price elasticity of demand is:

• the change in demand given a change in price.

• how the price changes given a change in quantity

  demanded.

• the percentage change in quantity demanded given a

  change in price.

• the percentage change in quantity demanded given a

  percentage change in price.

Along a downward sloping demand curve, the value of price

elasticity of demand:

• falls as the quantity demanded increases

• increases as the quantity demanded increases

• is the same along the demand curve

• varies with the level of expenditure

The price of a can of iced tea increases from $1.00 to $1.10.
The quantity demanded falls from 300 cans a week to 240

cans a week.
Calculate the price elasticity of demand.

• −0.5

• −2.5

• −2.0

• −2.22

The price elasticity of demand for a product is 1.

Which of the following changes is correct?

• A rise in price will result in total spending on the product

  to rise and then fall.

• A rise in price will result in no change in total spending

  on the product.

• A fall in price will result in an increase in total spending

  on the product.

• A fall in price will lead to an increase in quantity

  demanded but total spending on the product will fall.

What is likely to cause a high price elasticity of demand for a product?

• The product is habit forming

• expenditure on the product forms a small proportion of total spending

• The product is considered to be a necessity

• There are close substitutes to the product