IGCSE Econ Price Elasticity of Demand (PED)

What is price elasticity of demand?

• A measure of the extent to which price changes when the quantity demanded changes

• A measure of the extent to which the quantity demanded changes when price changes

• A measure of the extent to which total revenue changes when price changes

• A measure of the extent to which price changes when total revenue changes

Demand for a product is inelastic. What effect will a fall in price have?

• Demand will not change

• Demand will change by a greater percentage

• Total revenue will fall

• Total revenue will rise

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

• It is a necessity

• It is habit-forming

• It is relatively cheap

• It has close substitutes

The price of a product rises from $60 to $90. This causes demand to contract from 800 to 600. What type of price elasticity of demand does this product have over this price range?

• Perfectly inelastic

• Inelastic

• Unity

• Elastic

How does the availability of substitutes affect the price elasticity of demand for a product?

• It makes demand more elastic

• It makes demand more inelastic

• It has no effect on elasticity

• It makes demand perfectly elastic

Which of the following is an example of a product with perfectly inelastic demand?

• Luxury cars

• Salt

• Designer clothing

• Smartphones

If a product has a price elasticity of demand greater than 1, what does this indicate about the product's demand?

• Demand is inelastic

• Demand is elastic

• Demand is unitary

• Demand is perfectly inelastic

What happens to total revenue when demand is perfectly inelastic and the price increases?

• Total revenue increases

• Total revenue decreases

• Total revenue remains unchanged

• Total revenue becomes zero

Which of the following products is likely to have elastic demand?

• Insulin for diabetics

• Gasoline

• Branded cereal

• Water

If a product's demand is unitary elastic, what happens to total revenue when the price changes?

• Total revenue increases

• Total revenue decreases

• Total revenue remains unchanged

• Total revenue becomes zero