PED/PES

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.

Why must total spending on a product increase when its price increases?

• if demand for the product is price elastic

• if demand for the product is price inelastic

• if the price of a substitute product increases

• if the price of a complementary product increases

If pulses are an inferior good:

• demand will increase as income increases.

• supply will increase to satisfy the increase in demand.

• demand will fall as income increases.

• demand will be unchanged as income increases.

Given the value of income elasticity of demand. Which of the following is likely to be a necessity?

• a new pair of trainers +1.5

• a visit to KFC or McDonald’s +0.8

• petrol for the motorcycle +0.2

• a trip to a Premier League cricket or football game +2.5

The cross elasticity of demand for the change in quantity of a brand of cooking oil compared to a change in price of another brand is +1.3. Which of the following best describes the relationship between the two brands?

• complement and elastic

• complement and inelastic

• substitute and elastic

• substitute and inelastic

The cross elasticity of demand for Australian tourists visiting Indonesia is 2.4 when the price of visits to Malaysia increases by 5%. What is the percentage change in the number of Australian tourists visiting Indonesia?

• 5%

• 0.48%

• 2.08%

• 12%

The price elasticity of supply is:

• the change in supply given a change in price.

• how the price changes given a change in quantity supplied.

• the change in quantity supplied given a change in price.

• the percentage change in quantity supplied given a change in price.