Understanding Price Elasticity of Demand

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

• The market share of a product

• The relationship between supply and demand

• The cost of production

• How demand changes with price variations

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

• It doubles

• It decreases

• It increases

• It remains the same

Which of the following is an example of an elastic product?

• High-end sporting event tickets

• Apple iPhones

• Train tickets

• Chocolate bars

What characterizes an inelastic product?

• Demand doubles with a price increase

• Demand changes less than the price changes

• Demand remains constant regardless of price changes

• Demand changes significantly with price changes

Which of the following is an example of an inelastic product?

• Bread

• Milk

• Train tickets

• Chocolate bars

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

• By checking the market share

• By calculating the elasticity rating

• By observing the competitor's pricing

• By analyzing the production cost

What does an elasticity rating below 1 indicate?

• The product is perfectly inelastic

• The product is perfectly elastic

• The product is inelastic

• The product is elastic

In the worked example, what was the percentage change in demand when the burger price increased?

• 5%

• 7.5%

• 12%

• 10%

What was the elasticity rating calculated in the worked example?

• -1.5

• -0.5

• -1.25

• -0.75

Why was it considered a good business decision to increase the burger price in the example?

• Because demand increased significantly

• Because the competitor's prices were higher

• Because total sales revenue is likely to increase

• Because the cost of production decreased