Exam (elaborations)
Economics a questions and answers verified 2024
- Course
- Institution
Economics a questions and answers verified 2024
[Show more]
Content preview
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.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller LEWISSHAWN55. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $13.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now