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If the price of a good fallls by 10% and the quantity demanded rises by 15%, what is the price elasticity of demand?
0.67 i.e. 10/15
1.5 i.e. 15/10

Imagine a coffee shop knows that the value of PED is 4 and after a price change, demand rises by 12%. By how much did they reduce the price?

In the diagram below, money spent by consumers at the two different prices is equal.This means that:
The elasticity of demand is unitary at all points
Consumer surplus is the same at all prices
PED = 0 at all points
The fall in price is equal in percentage terms to the rise in quantity demanded.

A car for which the income elasticitiy of demand is -2.6 can be classifed as:
mildly inferior
strongly inferior
a very close substitute for another product

A matrix showing elasticity values for bikes and tube (metro) travel is a capital city is shown below. Which of the following statements is true?
The two goods are strong substitutes since the cross-elasticities between them > 1
The two goods are weak complements since the cross-elasticities between them < 1
It cannot be determined whether they are complements or substitutes. More evidence is required.
The two goods are complements since commuters tend to ride their bikes to the station and then caatch the metro.

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Experienced teacher of micro- and macro-economics

Tests Created: 11

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