DURRAH/ ECONOMICS 100 Q'S (STUDYGUIDEPK)

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  • Created by: durrah
  • Created on: 04-05-16 05:58

1/What is meant by price elasticity of demand?

Price elasticity of demand is a responsiveness of quantity demanded due to change in price of a commodity.

2/What is meant by price elasticity of demand?

Price elasticity of demand is a responsiveness of quantity demanded due to change in price of a commodity. It can be calculated using a formula.

3/PED =% CHANGE IN QUANTITY DEMANDED / % CHANGE IN PRICE

4/There are five types of elasticity where the value ranges from 0 to infinity. They are;

Perfectly inelastic ( elasticity value is equal to 0

Perfectly elastic ( elasticity value is equal to infinity)

Elastic ( elasticity value is greater than 1)

5 /Discuss  why  the  price  elasticity  of  demand  for  the  items  mentioned  in  the article might differ.

Note: - Here, no need of definition since in part –c definition of elasticity has been given)

The items mentioned in the article are clothing and footwear, together with certain perfumes, hair-styles, cell-phones and household appliances.

First of all clothing and foot wear can be classified as a basic human need where people find very difficult to live without that. This means any person is ready to buy these products at any price since they did not have a choice. So, these products are inelastic product wheOn the other hand, perfumes,  hair-styles,  cell-phones  and household  appliances  are products which have lots of substitutes available in the market. This means at any time consumers  can choose between these substitutes which are known as elastic product where a change in price will have a significant impact on price. re a change in price will have a very small or sometime no effect on quantity demanded.In my opinion, the price elasticity of demand for items mentioned in the article differs because some are necessities and some have lots of substitutes. 

6 / Define  price  elasticity  of  demand  and  suggest  why  different  goods  have different price elasticity? 

Price  elasticity  of  demand  can  be  defined  as a  responsiveness  of  quantity  demand  due  to change in price of the product.  There are various reasons why different  goods have different price elasticity of demand. Firstly, some goods are necessities like gas, food, clothing etc where people do not have any choice  for  consumption.  This  means  change  in price  will  not  have  much  effect  on  quantity demand. These goods are inelastic goods. Secondly, some goods are luxuries such as cars where there is availability of many substitutes in the market. This means change in price will have a significant effect on quantity demand. These goods are elastic goods.

7/ Discuss  whether  knowledge   of  price  elasticity  of  demand  is  of  use  to  a company selling holiday tours.Note: - Here, no need of definition since in part –c definition was given

This concept is used for producers to expect the sales and revenues of their companies.
First of all, elastic products are those which have variety of substitutes  where consumers have variety of choice in the market. So, decrease  in the

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