Supply and Demand and Price Elasticity
Elasticity
1. (a) The price elasticity of demand measures the responsiveness of the quantity demanded / price to a change in the quantity demanded / the quantity supplied / price.
[Delete wrong words.]
(b) Give the formula for price elasticity of demand.
2. Back in the mid-1990s, the government in the UK announced that for every 10 per cent rise in the price of cigarettes, the demand was likely to fall by 6 per cent. If this information was correct, what was the value of the price elasticity of demand for cigarettes at the time?
3. In each of the following pairs, tick which of the two items is likely to have the more elastic demand. Give reasons for your answer.
(a) Petrol (all brands) Esso petrol
(a) Holidays abroad Bread
(a) Salt Clothing
4. The formula for price elasticity of demand is as follows:
Proportionate (or percentage) change in quantity demanded
Proportionate (or percentage) change in price
This can be summarised as:
Qd / mid Qd P / mid P
The following table shows the quantity of a product demanded at two different prices:
P
Qd
16
14
25
35
(a) Calculate the proportionate change in quantity demanded when price falls from £16 to £14. (Use the first part of the formula, i.e. Qd / mid Qd , to do your calculation.)
(b) Calculate the proportionate change in price when price falls from £16 to £14. (Use the second part of the formula, i.e. P / mid P, to do your calculation.)
(c) What is the price elasticity of demand between £16 and £14?
5. The following diagram shows two demand curves that cross at a price of P0.
Which of the following statements are true?
(a) Curve D1 is inelastic and curve D2 elastic. True / False
(b) Demand is more elastic between P0 and P1 along curve D2 than along curve D1
1. (a) The price elasticity of demand measures the responsiveness of the quantity demanded / price to a change in the quantity demanded / the quantity supplied / price.
[Delete wrong words.]
(b) Give the formula for price elasticity of demand.
2. Back in the mid-1990s, the government in the UK announced that for every 10 per cent rise in the price of cigarettes, the demand was likely to fall by 6 per cent. If this information was correct, what was the value of the price elasticity of demand for cigarettes at the time?
3. In each of the following pairs, tick which of the two items is likely to have the more elastic demand. Give reasons for your answer.
(a) Petrol (all brands) Esso petrol
(a) Holidays abroad Bread
(a) Salt Clothing
4. The formula for price elasticity of demand is as follows:
Proportionate (or percentage) change in quantity demanded
Proportionate (or percentage) change in price
This can be summarised as:
Qd / mid Qd P / mid P
The following table shows the quantity of a product demanded at two different prices:
P
Qd
16
14
25
35
(a) Calculate the proportionate change in quantity demanded when price falls from £16 to £14. (Use the first part of the formula, i.e. Qd / mid Qd , to do your calculation.)
(b) Calculate the proportionate change in price when price falls from £16 to £14. (Use the second part of the formula, i.e. P / mid P, to do your calculation.)
(c) What is the price elasticity of demand between £16 and £14?
5. The following diagram shows two demand curves that cross at a price of P0.
Which of the following statements are true?
(a) Curve D1 is inelastic and curve D2 elastic. True / False
(b) Demand is more elastic between P0 and P1 along curve D2 than along curve D1