1. Quiz Elasticity

2. Has close substitutes Price elastic demand Coca cola PED coefficient >1 3

3. Not a necessity Price elastic demand Coca cola PED coefficient >1 3

4. PED<1 Price inelastic demand Agricultural goods, cigarettes, alcohol Few substitutes, addiction, necessity 3

5. Close substitutes Coca cola and Pepsi Beans and carrots Oranges and apples Price elastic in demand 4

6. Cars and Toyota cars Toyota cars are relatively price elastic in demand (to cars) Cars are relatively price inelastic in demand (to Toyotas) 2

7. Necessities Essential goods or services Medicines, food, addiction Relatively price inelastic in demand PED coefficient is <1 4

8. Ski vacation Luxury good or service Not essential for life Relatively price elastic in demand PED coefficient is >1 4

9. Lots of time to search for alternatives Relatively price elastic in demand PED coefficient is >1 2

10. No time to search for alternatives Relatively price inelastic in demand PED coefficient is <1 Need gasoline, now 2

11. Inexpensive item Relatively price inelastic in demand PED coefficient is <1 Candy, pencils and pens 2

12. %ΔQd ÷ %ΔPrice Price elasticity of demand PED coefficients are >1, <1 or =1 Varies along the length of the demand curve PED value ranges from 0 to ∞ Always negative so sign is ignored 5

13. (P2 minus P1)÷P1x100 %Δprice The percentage change in price 2

14. (P2 minus P1) Δprice The change in price 2

15. (Q2minus Q1)÷(P2 minus P1) Δquantity divided by Δprice “Slope” of demand curve 2

16. ΔQ ÷ ΔP x P÷Q Δquantity divided by Δprice times P1 divided by Q1 PED %ΔQd ÷ %ΔP 2

17. The more substitutes The greater the price elasticity of demand The easier it is to find alternatives and switch The more responsive quantity is to a change in price 3

18. The closeness of substitutes The greater the price elasticity of demand The easier it is to find alternatives and switch The more responsive quantity is to a change in price 3

19. The broader the definition, e.g. food The more price inelastic demand The harder it is to find alternatives and switch The less responsive quantity is to a change in price 3

20. Fruit relative to pears More price inelastic in demand Broad categories are more inelastic in demand 2

21. B A PED of “B” relative to “A” at a given price P Q Relatively price elastic in demand 1

22. B A PED of “A” relative to “B” at a given price P Q Relatively price inelastic in demand 1

23. BA PED of “A” relative to “B” at a given price P Q Cannot say; answer depends on the axes values 1

24. B A PED of “A” relative to “B” at a given price P Q Cannot say; the demand curves have different points 1

25. Increase Total Revenues Decrease price when PED is price elastic Raise price when PED is price inelastic Decrease price of manufactured goods Raise price of agricultural products Raise price of commodities 5

26. Commodity goods Commodities are goods from natural resources, e.g. agriculture Primary goods are commodities (cotton and rubber) Raise price of commodities to increase Total Revenues Few substitutes, often necessities Price inelastic in demand, PED <1 Price per unit is often small, inexpensive 4