Understanding Price Elasticity of Demand

What does the Price Elasticity of Demand (PED) measure?

• The cost of production

• The relationship between supply and demand

• The change in demand due to a change in price

• The total revenue of a business

If a product is elastic, what happens to total sales revenue when the price is increased?

• Total sales revenue increases

• Total sales revenue decreases

• Total sales revenue remains the same

• Total sales revenue doubles

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

• Train tickets for commuters

• Apple iPhones

• Chocolate bars

• High-end sporting event tickets

What characterizes an inelastic product?

• Demand doubles with a price increase

• Demand remains constant regardless of price

• Demand changes less than the price change

• Demand changes more than the price change

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

• Train tickets for commuters

• Petrol at individual stations

• Milk and bread

• Chocolate bars

How can you tell if a product is elastic or inelastic?

• By checking the brand loyalty

• By analyzing the production cost

• By using the elasticity rating

• By observing the market competition

What does an elasticity rating below 1 indicate?

• The product is elastic

• The product has no demand

• The product is inelastic

• The product is perfectly elastic

What is the formula for calculating the elasticity of a product?

• Percentage change in price divided by percentage change in quantity demanded

• Total cost divided by total revenue

• Percentage change in quantity demanded divided by percentage change in price

• Total revenue divided by total cost

In the worked example, what was the percentage change in demand when the burger price increased from £5 to £5.50?

• 12%

• 10%

• 7.5%

• 5%

In the worked example, what was the elasticity rating calculated for the burger price change?

• -1.25

• -0.75

• -0.5

• -1.5