What is the formula for the elasticity of demand?
Percentage change in quantity demanded divided by percentage change in price
Percentage change in price divided by percentage change in quantity demanded
Price times quantity demanded
Quantity demanded divided by price
Which of the following goods is likely to have an elastic demand?
When demand is perfectly inelastic, a change in price will result in:
No change in quantity demanded
A small change in quantity demanded
A large change in quantity demanded
A decrease in the price of the good
What is the difference between elastic and inelastic demand?
Elastic demand refers to a situation where a small change in price leads to a relatively larger change in the quantity demanded. On the other hand, inelastic demand refers to a situation where a change in price results in a relatively smaller change in the quantity demanded.
Discuss three factors that affect the elasticity of demand.
Three factors that affect the elasticity of demand include:
The necessity of the product: If a product is considered a necessity, consumers may continue to purchase it even if the price increases, making the demand for the product more inelastic.
Income of consumers: When consumers have a higher income, they may be less sensitive to price changes, making the demand for the product more inelastic.
Time: The longer the time period consumers have to adjust to a change in price, the more elastic the demand becomes, as they have more time to search for substitutes or adjust their consumption patterns.