PES & PED

A football club raises all stadium seat prices by 5%. The stadium is divided into four zones. The demand for seats falls by 1% in zone W, by 3% in zone X, by 5% in zone Y and by 6% in zone Z. In which zone is the responsiveness of demand for seats to the price change elastic?

• Zone W

• Zone X

• Zone Y

• Zone Z

A mobile (cell) phone operator increases the price of making calls on its network. After the price increase, the revenue of the mobile phone operator falls by 10%. What is the price elasticity of demand (PED) for the mobile operator’s service?

• Elastic

•   Inelastic

• Perfectly elastic

• Unit elastic

The owner of a hotel in Malaysia finds that the price elasticity of demand (PED) for accommodation in the area is–1.7. If the hotel owner decreases the price of a room by 5%, how would the demand for a room change?

•   It would decrease by 2.9%.

•   It would decrease by 8.5%.

• It would increase by 2.9%.

• It would increase by 8.5%.

What characteristic is likely to make the demand for a product price elastic?

• It is a necessity

•    It is addictive

• It is very cheap

• It has close substitutes

What is the significance to firms of price elasticity of demand?

•   It allows firms to measure the effect of a change in the price of their competitors.

• It allows firms to predict the effect of a change in price on their total revenue.

• It allows firms to measure their ability to change production due to a change in price.

• It allows firms to predict the change in costs of production.

The markets of four products are all in equilibrium. The table gives the value of the price elasticity of supply (PES) for each product. The demand for each product shifts to the right by 5000 units at all prices. Which product will have the largest price increase?

• option A

• option B

• option C

• option D

  In what circumstance would the supply of a product be elastic?

•   It is costly to produce

• It takes time to produce

•   It can be stored

•   It uses resources which are in short supply

The diagram shows the supply curve for a good. What is the price elasticity of supply when the price rises from $2 to $4?

• 0.2

• 0.5 

•   1

•    2

A firm is considering doubling the price of its product. Which price elasticity of demand (PED) for its product would give it the greatest increase in revenue?

• 0.0

• −0.5

• −1.0

• -2.0

A global pandemic causes the demand for air travel to decrease. Which value for the price elasticity of supply of air travel will cause the number of tickets for air travel to fall the most?

• 0

• 0.5

• 1

• 1.5