Economics Elasticity Quiz

What is elasticity in economics?

Elasticity in economics measures how much the quantity demanded or supplied of a good responds to a change in price.

What are the types of elasticity?

Types of elasticity include price elasticity of demand, price elasticity of supply, income elasticity of demand, and cross elasticity of demand.

What is price elasticity of demand?

Price elasticity of demand measures the responsiveness of quantity demanded to a change in the price of the good.

What factors determine the price elasticity of demand?

Factors include the availability of substitutes, the necessity vs luxury nature of the product, the proportion of income spent on the good, and the time period considered.

What are the two variables being measured when looking at Elasticity?

Price and Quantity Demanded

Measuring the sensitivity of demand aka the elasticity of demand coefficient is equal to

The percent change in quantity demanded divided by the percent change in price

when the price changes by the same percentage that the quantity demanded changes that is…

Unit elastic demand, meaning that the total revenue remains unchanged as price changes.

Inelastic

A given change in price causes an even smaller change in the quantity demanded, direct relationship

As price changes there is a smaller change in the quantity demanded

Elastic

As price increases quantity demanded decreases and vice versa, inverse relationship A given change in price leads to a proportionally larger change in quantity demanded, indicating a sensitive response to price changes.

Unit Elastic

As price increases or decreases there is a proportional change in the quantity demanded, constant. This means that the percentage change in quantity demanded is equal to the percentage change in price, resulting in total revenue remaining the same.

Demand Schedule v Demand Curve

Demand Schedule: a table showing the quantity demanded at different price levels.

Demand Curve: a graphical representation of the data in the demand schedule which shows the relation between the price and the quantity demanded.

Elasticity Coefficient Equation

(The change in the quantity demanded divided by the average of the two values/(the change in the price divided by the average of the two prices)

According to the scale

If the value of the elasticity coefficient is:

Less than 1: inelastic

Equal to 1: unit elastic

Greater than 1: elastic