Elasticity and Factors Affecting Demand Quiz

Unlike factors such as price and substitutes, consumer preferences do not directly impact demand elasticity.

The time period is a key determinant of supply elasticity, as it influences the ability of producers to adjust their production levels.

Elasticity is equally applicable to both demand and supply, helping analyze the responsiveness of quantity to changes in price.

It gauges how much the quantity demanded changes in response to a change in price.

A positive cross-price elasticity suggests that an increase in the price of one good leads to an increase in demand for the other, indicating substitution.

It focuses on how changes in consumer income affect the quantity demanded for a good.

Unitary elastic describes a situation where the percentage change in quantity demanded is exactly equal to the percentage change in price.

Cross-price elasticity is crucial for substitute goods, as it measures how the price change of one good affects the quantity demanded for another.

Price Elasticity of Demand (PED) is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

A perfectly elastic demand curve is represented by a horizontal line, indicating consumers are willing to buy any quantity at a specific price.

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price, which in this case is 5% / 10% = 0.5. The absolute value of this ratio is 2.0.

Necessities like bottled water often have inelastic demand, meaning consumers are less responsive to price changes.

Elasticity of demand tends to increase along a linear demand curve, with different sections having varying degrees of responsiveness.