Price Elasticity

Describes very little a change in demand with a large change in price 

• elastic 

• inelastic 

• demand curve 

• price 

when consumers have a need for a product that is urgent 

• the demand curve is inelastic 

• the demand curve is elastic 

• the demand curve is complementary 

• the demand curve is unit demand 

Price elasticity of demand measures

• The responsiveness of price to a change in demand

• The responsiveness of demand to a change in income

• The responsiveness of demand to a change in price

• The responsiveness of demand to a change in supply

Goods with elastic demand are likely to

• Have lots of close substitutes

• Be addictive in nature

• Take up a small proportion of a consumer's regular spending

• Have a high degree of customer loyalty

Match the following definitions to the correct term.

• Elastic

• General measure of responsiveness (cause and effect relationship)

• Unit Elastic

• Extent to which a change in price causes a change in quantity demanded, aka whether it is a big or small change

• Elasticity

• When a given change in price causes a relatively smaller change in quantity demanded

• Demand Elasticity

• When a given change in price causes a proportional change in quantity demanded

• Inelastic

• When a given change in price causes a relatively larger change in quantity demanded

​ (a)   demand - price changes have little effect on the quantity you buy.

​ (b)   demand - price changes have a significant effect on the quantity you buy.

• Inelastic

• Elastic

Is the following example one for elastic or inelastic demand: Gasoline prices skyrocket.

• Elastic

• Inelastic

​ ​ ​ (a)   demand means that a change in price causes a large or big change in quantity. People are very influenced by changes in price.

• elastic

• Inelastic

• high

A business that is about to have a sale will hope that consumer demand is

• Exceptional

• Normal

• Price elastic

• Price inelastic

A firm can increase its revenue by raising its price if

• Demand is price inelastic

• Demand is price elastic

• There are a large number of close substitutes

• The degree of brand loyalty is low