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WorksheetsElasticity of Demand & Supply
Total questions: 35
Worksheet time: 20mins
Elasticity refers to
how producers of goods and services react to price changes
how consumers of goods and services react to price changes
how far a supply of scarce goods can be stretched
how often the price of a good or service changes when quantity demanded changes
Define Income Elasticity of Demand
YED measures the degree of responsiveness of quantity demanded for a good to a change in consumer's income, ceteris paribus
YED measures the degree of responsiveness of demand for a good to a change in consumer's income, ceteris paribus
YED measures the degree of responsiveness of consumer's income to a change in quantity demanded for a good, ceteris paribus
YED measures the degree of responsiveness of consumer's income to a change in demand for a good, ceteris paribus
Consumers demand less of this type of goods when their income increases.
Low grade rice
salt
bungalore
furniture
If the income elasticity of market demand is negative, most consumers view the good as:
a luxury good
having many imperfect substitutes.
an inferior good.
a normal good.
If the YED of a good is assessed to be 0.7, the good can be classified as a
salted fish
books
salt
jewelerys
Which one is the correct formula for Income Elasticity of demand?
Percentage change in income / Percentage change in quantity demand for a good
Percentage change in quantity demand for a good / Percentage change in income
Percentage change in supplied for a good / Percentage change in income
Percentage change in quantity demand for a good / Percentage change in its price
This car are referring to
Normal Goods
Inferior Goods
Luxury Goods
Compulsary Goods
YED = 0 is referring to
Normal Goods
Inferior Goods
Luxury Goods
Necessity Goods
When YED value is positive and the value is 0.5
Normal Good
Inferior Good
Luxury Good
Necessity Goods
Complementary goods have:
the same elasticities of demand.
very low price elasticities of demand.
negative cross price elasticities of demand with respect to each other.
positive income elasticities of demand.
If the cross-price elasticity between two commodities is 1.5,
the two goods are luxury goods.
the two goods are complements.
the two goods are substitutes.
the two goods are normal goods.
What does cross elasticity measure?
Measures responsiveness of changes in quantity demanded to changes in price.
Measures the responsiveness of the quantity demanded of
a good or service to a change in income.
Measures the responsiveness of the quantity demanded of one good to changes in price of another good.
What is the relationship between two good if Ex = -2
Substitutes
No relationship
Complements
What is the relationship between two goods if Ex = 5
Substitutes
No relationship
Complements
What type of good would have an Ey = 2
Luxury
Necessity
Inferior
What type of good would have an Ey = -4
Luxury
Necessity
Inferior
What type of good would have an Ey = 0.5
Luxury
Necessity
Inferior
What does income elasticity measure?
Measures responsiveness of changes in quantity demanded to changes in price.
Measures the responsiveness of the quantity demanded of
a good or service to a change in income.
Measures the responsiveness of the quantity demanded of one good to changes in price of another good.
What are inferior goods?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are substitutes?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are luxury goods?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are complements?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
What are necessities?
Lower quality goods that we consume when we are on lower incomes
Higher quality versions of goods that we consume more of as our incomes rise
Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport
Goods that can be used in place of each other
Goods that we consume/use together
