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Economics a questions and answers verified 2024
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Economics a questions and answers verified 2024
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Economics- PED and PESWhat is the PED formula? - correct answer ✔% Change in QD / % change in
price
If something is price inelastic, then... - correct answer ✔Demand is less
sensitive to price changes. A change in price would cause a less than
proportionate change in the quantity demanded.
If something is price elastic, then... - correct answer ✔Demand is more
sensitive to price changes. A change in price would lead to a more than
proportionate change in the quantity demanded.
A good has a price elasticity of demand of 0. What does this mean? - correct
answer ✔The demand for the good is perfectly price inelastic. A change in
price p1-p2 leads to no change in the quantity demanded.
A good has a price elasticity of demand of between 0 and -1. What does this
mean? - correct answer ✔The demand for the good is relatively price
inelastic. Change in price P1-P2 will lead to a less than proportionate change
in QD.
A good has a price elasticity of demand of -1. What does this mean? - correct
answer ✔The demand for good has unitary price elasticity. A change in price
P1=P2 will lead to a totally proportionate change in QD.
A good has a price elasticity of demand of between -1 and infinity. What does
this mean? - correct answer ✔The demand for good is relatively price elastic.
A change in price p1-p2 leads to a more than proportionate change in QD.
, A good has a PED of - infinity. What does this mean? - correct answer
✔Demand is perfectly price elastic. Change in price above p1 kills demand.
What is the acronym for the determinants of PED? - correct answer
✔PANTS
What do each of the letters in the acronym for the determinants of PED stand
for? - correct answer ✔P- proportion of income
A- Addictive
N- Necessity
T- time to shop around
S- Suitability of substitutes available
Explain P in the acronym for the determinants of PED. - correct answer
✔Proportion of income- if large prop of inc. then demand will be more
sensitive to price changes (elastic)
If lower prop of inc. then demand will be less sensitive to price changes
(inelastic).
Explain A in the acronym for the determinants of PED. - correct answer
✔Addictive- is it addictive? If so, then more likely to be PED inelastic and less
sensitive to price changes. Eg cigarettes, gambling. If not, then more likely to
be PED elastic and more sensitive to price changes.
Explain N in the acronym for the determinants of PED. - correct answer
✔Necessity- If necessity (eg Heating, water, medicines) then demand is less
sensitive to price changes therefore PED inelastic.
If not necessity (eg games, tv subscriptions) then more sensitive to price
changes so PED elastic.
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