Price elasticity of demand | My Assignment Tutor

Elasticity provides a way of measuring how sensitive demand or supply is to factors such as a change in price.Take the relationship between price and quantity demanded. We know that if price rises then people will buyless but we do not know how much less. Price elasticity of demand allows us to calculate this111111. Price elasticity of demand measures the percentage change in [A]_________________caused by a percent change in [B]__________2. If the demand for a product is said to be elastic, this is demand for which priceelasticity is [A]__________ than 13. If the total revenue from the sales of a good rises by 10% when its price is increased by10%, then the demand for the good must perfectly [A]__________4. There is a difference between brand-level and industry-level price elasticity. Due to a rangeof substitutes, brand-level elasticity tends to be [A]__________ then industry-level elasticity5. For alcohol, the short run price elasticity of demand is estimated to be 0.2 in Europe.This means that the demand for alcohol is relatively price [A]__________ and that pricesneed to increase by [B]__________% to reduce alcohol consumption per head by 15%11116. A manufacturer reduces the price of its digital cameras by 20% and, as a result, the volume ofsales rises by 30%. Therefore, the value of price elasticity of demand for the good is7. A supermarket reduces the price of oranges from 50 pence each to 30 pence each. Theweekly sales increase from 8,000 to 10,000. The value of price elasticity of demand is8. Suppose that a pizza vendor at a basketball game can sell 3,000 slices of pizza per night ata price of $3 per slice. If the vendor raises the price to $4 per slice, the number of slices soldfalls to 2,000. Based on this information, the price elasticity of demand using the is?9. An high-definition flat screen TV sold 500,000 units at £1000 each last year. It is knownthat its price elasticity of demand is -2.0 (calculated at the current price and quantity). Whatwould sales be this year if there are no other changes affecting demand and the price perunit is lowered to £950?– 1 –– 2 –10. Product X has a price elasticity of demand of 0.25 while Product Y has a price elasticity of1demand of 1.5. A likely explanation of these values is that compared to product Y,product X A. is considered more of a luxuryB. takes up a larger proportion of consumers’ incomeC. has more substitutesD. is purchased more out of habit11. The price elasticity of demand for Apple iPhone smart-phones is likely to increase when1A. the government grants all workers a generous income tax cutB. more applications are made available to consumers of mobile phone technologyC. a new competitor enters the mobile phone marketD. production is shifted to a country where average wages are lower12. A recent analysis of the market for broadband deals found that the demand was more price elastic1in the long run rather than the short run. The price elasticity of demand will tend to increase thelonger the time period after a price change because:A. consumers’ incomes will increaseB. the demand curve will shift outwardC. all prices will increase over timeD. consumers are better able to find substitutes13. The demand for Honey Nut Loops cereal is more price-elastic than the demand for cereals as a1whole. This is best explained by the fact that:A. Honey Nut Loops are regarded as a luxury productB. there are more substitutes for Honey Nut Loops than for cereals as a wholeC. spending on cereals as a whole is greater than consumption of Honey Nut LoopsD. Honey Nut Loops are seen by consumers as a necessity14. When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent.1In this range of prices, demand for this productis: A. inelasticB. elasticC. unit elasticD. perfectly elasticE. perfectly inelastic15. In 2009, some tobacco companies in the US wanted to raise prices but a spokesman said the1tobacco industry was no longer in a position where it could increase producer revenues by raisingprices. What might be concluded from this statement?A. The profit of tobacco growers does not depend on the price systemB. The price elasticity of demand for tobacco is likely to be greater than unity (1)C. The price elasticity of demand for tobacco is lower than it used to beD. Demand for tobacco is price inelastic– 2 –

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