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WorksheetsPED and YED Revision
Total questions: 104
Worksheet time: 2hrs 33mins
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
Inelastic demand curves are illustrated as
Flat
Horizontal
Positively sloped
Steep
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
Dame Allan's is about to raise school fees by 10% The most elastic demand response is likely to come from the parents of pupils going into
Year 7
Year 10
Year 11
Year 13
A 20% price rise is likely to cause demand to fall by only 1% for
New cars
First class flights
Apples
Shoe laces
Price elastic demand curves are
Normal, positive and flat
Normal, negative and flat
Exceptional, negative and flat
Normal, negative and steep
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
The demand for petrol is likely to become more price elastic
If electric cars become more expensive
As electric cars become cheaper
As consumers become more aware of climate threats
If public transport becomes more reliable
How could a business try to find out its own price elasticity of demand?
Carry out surveys for customer satisfaction
Change workers wage rates and record the effect on productivity
Increase advertising spending on its products
Change prices regularly and record the effect on sales levels
Price Elasticity of Demand (PED) is the sensitivity of demand to a change in p (a)
If the percentage change in price leads to a greater percentage change in the quantity demanded, the answer will be greater than 1. This indicates that demand is relatively responsive to a change in price. What does this refer to?
Elastic
Inelastic
A supermarket sells essential products such as bread and milk. Are these products likely to be elastic or inelastic?
Inelastic
Elastic
One marketing strategy might be to lower prices. If a manager lowered the prices of his/her products, which type of product would be more likely to increase revenue?
Elastic
Inelastic
Your calculations for PED have given you an answer of -1, is the product elastic or inelastic?
Inelastic
Elastic
An answer for PED with -0.? indicates what type of product?
(a)
A business can reduce the PED by b (a) loyalty.
Complete the formula to calculate PED:
= % change in quantity demanded
% change in (a)
Elasticity measures...
The extent of a change in demand
The extent of a change in price
The quantity demanded
The % of income a good consumes
Price elasticity of demand measures...
The responsiveness of quantity demanded given a change in price
The responsiveness of price given a change in demand
The responsiveness of quantity demanded given in a change in population size
The quantity demanded at any given price level
The formula for price elasticity of demand is...
% change in Qd / % change in Price
% change in Price / % change in Qd
Change in quantity / Change in price
% change in price / % change in income
A PED value greater than 1 means...
The good is price elastic
The good is price inelastic
The good is unitary elastic
The good is perfectly price elastic
A PED value less than 1 means...
The change in demand is less than the change in price
The change in demand is more than the change in price
A change in price doesn’t cause a change in demand at all
A change in price leads to a proportionate change in demand
A change in price doesn’t cause a change in demand at all
What is the PED value?
0
1
>1
<1
A PED value of -1.2 means...
The change in demand is more than the change in price
The change in demand is less than the change in price
A change in price leads to a proportionate change in demand
A change in price causes a complete stop to demand
Price for a bottle of water increases by 20%. As a result there is a fall in demand of 5%. Calculate the PED.
(a)
Price of a chocolate bar decreases by 4%. As a result there is an increase in demand of 12%. Calculate the PED.
(a)
Price of a can of beans increases from 50p to 55p. As a result there is a decrease in demand of 25%. The PED is...
-2.5 and the product is therefore price elastic
-2.5 and the product is therefore price inelastic
-0.4 and the product is therefore price elastic
-2 and the product is therefore price elastic
Price of a new car increases by 4.2%. As a result there is a decrease in demand from 8,000 units to 6,000 units. The PED is...(to 2dp)
(a)
The PED for a jar of coffee is -3. In April the price was £1 per jar and the firm sold 20,000 units. In July the price has increased to £1.20 per jar. How many units were demanded in July?
(Please only enter your final answer in numeric form with no words or letters)
(a)
A product has a PED of -0.1, draw what you would expect the demand curve to look like
The price of a product decreases by 2% and demand increases by 10%. Draw what you would expect the demand curve to look like.
A product's price is decreased by 2% and demand does not change. Draw what you would expect the demand curve to look like.
Which of the following would make a product more price elastic?
It has lots of substitutes
It consumes a low % of income
It is a necessity
It is in the short-term
Which of the following would make a good more price inelastic?
It consumes a low % of income
It has many substitutes
It is not addictive
It is a luxury
PED is inelastic and a firm raises its price. What happens to total revenue?
Total revenue increases
Total revenue decreases
Total revenue stays the same
Marginal revenue decreases
PED is –1.5 and the firm raises price by 4%. What happens to total revenue?
Total revenue decreases
Total revenue increases
Total revenue stays the same
Total revenue decreases by 4%
The PED for a jar of coffee is -3. In April the price was £1 per jar and the firm sold 20,000 units. In July the price has increased to £1.20 per jar. How will total revenue change?
Revenue falls by £10,400
Revenue falls by £9,600
Revenue increases by £5,600
Revenue increases by £10,200
Because of the law of demand, PED is always
Negative
Zero
Positive
Infinite
If PED of a good is 0.4, we say that demand for the good is
Price elastic
Perfectly price elastic
Unitary price elastic
Price inelastic
If a good has only a few substitutes and these substitutes are not close to the good, the PED for the good is likely to be
Perfectly Price Inelastic
Price Inelastic
Perfectly Price Elastic
Price Elastic
A producer has a good which PED is assessed to be 1.7. If he wishes to increase total revenue, what should the producer do?
Increase price
Keep price the same
Decrease price
None of the above
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
If the YED of a good is assessed to be 1.7, the good can be classified as a
Inferior Good
Normal Good
Necessity
None of the above
If your salary increase by 30 % and in response you increase your clothing purchases by 20 %, income elasticity equals______and clothing is_______.
0.67; normal good
.67; inferior good
1.5; normal good
1.5; luxury good
The determinants of the price elasticity of demand for a specific good include all of the following except:
the availability of substitutes
the time period involved
the ease with which resources can be shifted to and from the production of this good to other uses
whether the good is a luxury or neccessity
Water has seen an increase in demand 8% this summer, while the price has decreased 12%
1.5 inelastic
1.5 elastic
.67 inelastic
.67 elastic
Wheat has seen a decrease in demand of 5%, while the price has increased 7%
1.4 inelastic
1.4 elastic
.71 inelastic
.71 elastic
Oil has seen a decrease in demand of 9%, while the price has increased 13%
1.44 inelastic
1.44 elastic
.69 inelastic
.69 elastic
Prada has seen a increase in demand of 70%, while the price has decreased 35%
.5 inelastic
.5 elastic
2 inelastic
2 elastic
Red Wing Shoes has seen a decrease in demand of 40%, while the price has increased 20%
.5 inelastic
.5 elastic
2 inelastic
2 elastic
Electricity has seen a decrease in demand of 14%, while the price has increased 18%
1.3 inelastic
1.3 elastic
.78 inelastic
.78 elastic
What does YED stand for in business economics?
Yield Elasticity of Demand
Yearly Economic Demand
Income Elasticity of Demand
Youth Economic Development
Match the following terms with their correct definitions
Goods for which demand increases as income increases
Normal Goods
Goods for which demand decreases as income increases
Inferior Goods
A measure of how much the demand for a good changes with a change in income.
Income Elasticity of Demand
What does 'demand' mean in a business context?
The amount of a product that consumers are willing and able to purchase at a given price
The amount of a product that producers are willing to sell at a given price
The cost of producing a product
The profit made from selling a product.
Match the following terms with their definitions
Financial assistance given by the government to support a business
Subsidy
The introduction of new products or methods
Innovation
The responsiveness of the quantity demanded of a good to a change in its price.
Price Elasticity of Demand (PED)
Which product is likely to have a higher YED (Income Elasticity of Demand)?
Luxury Car
Basic Food Item
Designer Clothing
Generic Medicine
The concept of YED is used to measure the responsiveness of demand to changes in (a) .
Price
Supply
Advertising
Match the following products with their likely YED category:
Necessity
Bread
Luxury
Sports Car
Normal Good
Movie Tickets
What is the formula for calculating the income elasticity of demand?
Percentage change in quantity demanded / Percentage change in income
Percentage change in income / Percentage change in quantity demanded
Percentage change in price / Percentage change in quantity demanded
Percentage change in quantity demanded / Percentage change in price
The income elasticity of demand is interpreted as a measure of how much the quantity demanded of a good responds to a change in consumers' income. Which of the following best describes a good with an income elasticity greater than 1?
Inferior good
Normal good
Luxury good
Necessity
The factors influencing income elasticity of demand include consumer preferences, the nature of the good, and the level of income. Which of the following is NOT a factor?
Consumer preferences
Price of the good
Nature of the good
Level of income
Match the following concepts with their significance to businesses:
Indicates a luxury good
High income elasticity
Indicates a necessity
Low income elasticity
Indicates an inferior good
Negative income elasticity
Which of the following is true about an inferior good?
A) Demand increases when consumer income increases.
B) Demand decreases when consumer income increases.
C) Demand remains constant when consumer income increases.
D) Demand increases more than proportionally as income rises.
Match the following types of goods with their characteristics: Inferior Good, Normal Good, Luxury Good
Demand increases more than proportionally as income rises
Demand decreases when consumer income increases
Demand decreases when consumer income increases
Demand increases when income increases.
Demand increases when income increases.
Demand increases more than proportionally as income rises
Which of the following products is typically considered an 'inferior good'?
Nike Slides
Luxury Car
Pot Noodle
Designer Handbag
In economics, an 'inferior good' is a type of good for which demand (a) as income increases.
Increases
Decreases
Stays the same
Match the following products with their economic classification: 1) Nike Slides 2) Luxury Car 3) Pot Noodle.
Inferior Good
Pot Noodle
Normal Good
Nike Slides
Luxury Good
Bugatti
What does the acronym YED stand for?
Yearly Economic Demand
Yield Elasticity of Demand
Income Elasticity of Demand
Investment Elasticity of Demand
YED stands for Income Elasticity of Demand. We use the letter 'Y' instead of 'I' because 'I' is reserved for the word (a) .
Income
Investment
Interest
Inflation
What is another name for Income Elasticity of Demand?
YED
PED
AED
CED
Income Elasticity of Demand is a calculation used by businesses to estimate how demand will change given changes in (a) . A) price B) income C) supply D) technology.
price
income
supply
technology
Match the following concepts with their descriptions:
A calculation used to estimate demand changes
Business Demand Measurement
Changes in consumer income affect demand
Consumer Income Change
Measures how demand for a product is affected by income change.
Income Elasticity of Demand
What is the likely lunch choice for someone who is broke?
Gourmet meal
Fast food
Home-cooked meal
No lunch
MATCH_THE_FOLLOWING: Match the economic situation with the likely lunch choice.
Gourmet meal
Fine dining experience
Fast food
Quick bite
Home-cooked meal
Comfort food
What is the formula for calculating income elasticity of demand?
Percentage change in quantity demanded / Percentage change in income
Percentage change in income / Percentage change in quantity demanded
Change in quantity demanded / Change in income
Change in income / Change in quantity demanded
Match the following terms with their definitions:
Quantity demanded increases as income increases
Positive income elasticity
Quantity demanded decreases as income increases
Negative income elasticity
Quantity demanded does not change as income changes
Zero income elasticity
What is a characteristic of normal goods?
A) Consumer demand decreases when income increases
B) Consumer demand increases when income increases
C) YED value is less than 0
D) They are luxury items.
What are inferior goods?
Products where demand increases as income increases
Products where demand decreases as income increases
Products with a positive YED value
Products with a YED value of zero.
Fill in the blank: The YED value for an inferior good will be (a) .
>0
=0
>1
Match the following: Inferior goods, YED value,
-1.5
Inferior goods
Tesco Value lager
Inferior good example
Decreases as income increases.
Income elasticity of demand is negative
What is a luxury good?
A good that decreases in demand as income increases
A good that increases in demand proportionally with income
A good that increases in demand more than proportionally with income
A good that has no relation to income.
Fill in the blank: The YED value for luxury goods is typically (a) . A) <1 B) =1 C) >1 D) 0.
<1
=1
>1
0
Match the following:
Luxury good
>1
YED value
Game with extra content
Example
Increase in demand more than proportionally with income.
Which of the following is considered an inferior good?
Match the following products with their perceived quality: 1) Everyday Value Digestive Biscuits 2) Sainsbury's Basics Tomato Ketchup 3) Designer Coffee
Inferior
Inferior
Normal
Normal
Luxury
Luxury
What does a positive income elasticity of demand indicate about a good?
The good is inferior
The good is a necessity
The good is a luxury
The good is a substitute.
Match the following types of goods with their income elasticity of demand: 1) Necessity 2) Luxury 3) Inferior.
Positive and greater than one
less than one
Positive and less than one
greater than one
Negative
Negative
What does the YED formula represent?
Price Elasticity of Demand
Income Elasticity of Demand
Cross Elasticity of Demand
Supply Elasticity of Demand
The YED formula is used to calculate the (a) .
% change in price
% change in quantity supplied
% change in quantity demanded
% change in income
What is the formula for calculating the percentage change in price or quantity demanded?
(Price new - Price old) / Price old x 100
(Price old - Price new) / Price new x 100
(Price new + Price old) / Price old x 100
(Price new - Price old) / Price new x 100
Match the following scenarios with their correct YED values: Demand increases from 6,438 units to 6,489 units with a 12% income increase. Demand increases from 20,000 units to 25,000 units with a 15% income increase. Demand increases from 52,476 units to 702,003 units with a 4% income increase.
Demand increases from 6,438 units to 6,489 units with a 12% income increase.
0.08
Demand increases from 20,000 units to 25,000 units with a 15% income increase.
1.67
Demand increases from 52,476 units to 702,003 units with a 4% income increase.
5.00
For normal goods, YED will typically be......
Positive
Negative
None of the above
Both of the above
For inferior goods, YED will typically be......
Positive
Negative
None of the above
Both of the above
For luxury goods, YED will typically be......
Positive
Negative
None of the above
Both of the above
Negatively inelastic goods are usually inferior
True
False
Select the correct YED
0
0.5
1
-0.3
What type of good is this shoe?
Necessity
Inferior
Sticky
Luxury
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
In a recession, what type of product is it typically better to be manufacturing?
Inferior
Normal
Luxury
If the price of a product increases from £10 to £12, and the quantity demanded falls from 100 units to 80 units, what is the price elasticity of demand (PED)?
-0.5
-1.2
-2.0
-1.5
The price of a product falls from £50 to £40, and the quantity demanded increases from 200 to 250 units. What is the PED?
-0.75
-1.25
-1.5
-2.0
