10 questions🇬🇧English
📉 Price Elasticity of Demand – A-level
Economics · A-level — practises calculating PED, its determinants and its link with total revenue and taxes
Make it your own private quiz and change anything you like
Questions
Which formula is used to calculate price elasticity of demand (PED)?
% change in quantity supplied ÷ % change in price
% change in price ÷ % change in quantity demanded
% change in quantity demanded ÷ % change in price
Change in quantity demanded ÷ change in income
20s
A good has a PED of −0.4. How would economists describe its demand?
Price inelastic
Price elastic
Unitary elastic
Perfectly elastic
20s
What does a perfectly price inelastic demand curve look like?
A vertical line with PED of 0
A horizontal line with PED of 0
A vertical line with infinite PED
A horizontal line with PED of −1
20s
The price of a good rises by 10% and quantity demanded falls by 25%. What is the PED?
−2.5
−0.25
−0.4
−15
30s
Which of these products is most likely to have price elastic demand?
Petrol
A particular brand of crisps
Table salt
Tap water
30s
A firm's product has a PED of −0.5. If the firm raises its price, what happens to its total revenue?
Total revenue falls to zero
Total revenue falls
Total revenue stays the same
Total revenue rises
30s
Demand for a good is unitary elastic. If the price is cut by 5%, what happens to total revenue?
It rises by 5%
It falls by 5%
It stays the same
It doubles
30s
Using original values, price rises from £4 to £5 and quantity demanded falls from 200 to 180. What is the PED?
−0.4
−2.5
−4
−0.2
60s
Moving down a straight-line demand curve towards lower prices, what happens to the magnitude of PED?
It rises, so demand becomes more elastic
It stays constant along the whole curve
It always stays equal to the slope
It falls, so demand becomes more inelastic
30s
Why do governments often place indirect taxes on goods with price inelastic demand, such as tobacco?
Prices paid by consumers do not rise at all
Quantity falls only slightly, so tax revenue is high
Producers then bear all of the tax burden
Consumption falls sharply, so revenue is high
30s