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Progress: 1 / 25

State the formula for income elasticity of demand (YED).

YED = percentage change in quantity demanded ÷ percentage change in income.

How can knowledge of YED help firms plan production?

Firms producing luxury goods can expect higher sales during economic growth and lower sales during recessions.

List three main determinants of PED.

Number and closeness of substitutes, proportion of income spent, and time period.

What is the relationship between PED and total revenue?

If demand is elastic, price and total revenue move in opposite directions; if inelastic, they move in the same direction.

If the price of a product rises by 10% and quantity supplied rises by 15%, what is PES?

PES = 15 ÷ 10 = 1.5 (elastic).

Why is time an important factor affecting elasticity?

Over time, consumers and producers can adjust behavior, making both demand and supply more elastic.

Define price elasticity of supply (PES).

PES measures the responsiveness of quantity supplied to a change in price.

Why is the PES for primary commodities generally lower than for manufactured goods?

Because production of primary goods is limited by natural factors and time, making supply less responsive to price changes.

If the price of a product falls by 5% and quantity demanded increases by 2%, what is PED?

PED = 2 ÷ 5 = 0.4 (inelastic).

How can governments use elasticity concepts for taxation policy?

They can impose higher taxes on inelastic goods to raise more revenue with smaller quantity changes.

What does elasticity measure in economics?

The responsiveness of one variable to a change in another variable, such as quantity demanded to a change in price.

Define income elasticity of demand (YED).

YED measures the responsiveness of demand to a change in consumer income.

State the formula for price elasticity of demand (PED).

PED = percentage change in quantity demanded ÷ percentage change in price.

What does a positive YED indicate?

The good is a normal good — demand rises when income increases.

Explain how elasticity affects the volatility of primary commodity prices.

Low PED and PES cause large price fluctuations when demand or supply changes.

Why is the PED for primary goods generally lower than for manufactured goods?

They are necessities with fewer substitutes, so consumers are less responsive to price changes.

If income increases by 8% and demand for a product rises by 4%, what is YED?

YED = 4 ÷ 8 = 0.5 (income inelastic normal good).

State the formula for price elasticity of supply (PES).

PES = percentage change in quantity supplied ÷ percentage change in price.

What does a negative YED indicate?

The good is an inferior good — demand falls when income increases.

Define price elasticity of demand (PED).

PED measures the responsiveness of quantity demanded to a change in price.

A 20% rise in price causes a 10% fall in demand. What happens to total revenue?

Demand is inelastic (PED = 0.5), so total revenue increases.

If the price of a product rises by 10% and quantity demanded falls by 20%, what is PED?

PED = 20 ÷ 10 = 2 (elastic).

List three main determinants of PES.

Mobility of factors of production, unused capacity, and ability to store stock.

What are the possible ranges of values for PED?

Perfectly elastic (∞), elastic (>1), unitary (=1), inelastic (<1), perfectly inelastic (0).

How can firms use knowledge of PED in pricing decisions?

If demand is inelastic, firms can raise prices to increase total revenue.

Beef Prices Hit Record Highs: A Classic Case of Supply and Demand

Beef Prices Hit Record Highs: A Classic Case of Supply and Demand

Why Air Fares Are Soaring: Conflict, Fuel Prices and Supply Constraints Explained

Why Air Fares Are Soaring: Conflict, Fuel Prices and Supply Constraints Explained

Trump’s Beef with Beef: How Tariffs and Imports Are Shaping U.S. Meat Prices

Trump’s Beef with Beef: How Tariffs and Imports Are Shaping U.S. Meat Prices

Alcohol Prices Surge as Trinidad and Tobago Doubles Excise Duty

Alcohol Prices Surge as Trinidad and Tobago Doubles Excise Duty

Lamborghini Stays Loud: Why the Supercar Maker Isn’t Ready to Go Electric

Lamborghini Stays Loud: Why the Supercar Maker Isn’t Ready to Go Electric

India Slashes Taxes to Spark Spending Surge — But Will It Work?

India Slashes Taxes to Spark Spending Surge — But Will It Work?

Shanghai’s AI Boom: How China is Expanding the Supply of a Future-Defining Industry

Shanghai’s AI Boom: How China is Expanding the Supply of a Future-Defining Industry

Sweet Tooth, Sour Prices: Food Inflation Rises Again in the UK

Sweet Tooth, Sour Prices: Food Inflation Rises Again in the UK

Foreign Phone Sales in China Plunge Amid Rising Local Competition

Foreign Phone Sales in China Plunge Amid Rising Local Competition

Coffee Prices Hit Record Highs as Supply Struggles to Meet Global Demand

Coffee Prices Hit Record Highs as Supply Struggles to Meet Global Demand

New Zealand’s Tourism Tax Hike: A Boost or Barrier for Economic Growth?

New Zealand’s Tourism Tax Hike: A Boost or Barrier for Economic Growth?

CHIPS act to fuel Samsung’s Texas Expansion

CHIPS act to fuel Samsung’s Texas Expansion

Fizzled Out: Australia’s Soft Drink Shortage Due to CO2 Crunch

Fizzled Out: Australia’s Soft Drink Shortage Due to CO2 Crunch

assorted wine bottles

Thailand’s Strategic Tax Cut on Alcohol to Revitalise Tourism

Scotland to Increase Alcohol Minimum Price by 30% in Public Health Push

Scotland to Increase Alcohol Minimum Price by 30% in Public Health Push

UK Government to ban disposable vapes

UK Government to ban disposable vapes

Kentucky Bourbon Industry Braces for Potential 50% EU Tariff

Kentucky Bourbon Industry Braces for Potential 50% EU Tariff

Soaring Sugar Prices and The Global Economic Impact

Soaring Sugar Prices and The Global Economic Impact

WeWork Files for Bankruptcy Amidst Debt Challenges and Remote Work Shift

WeWork Files for Bankruptcy Amidst Debt Challenges and Remote Work Shift

Apple Braces for Potential Fourth Quarter Revenue Decline Amid Global Challenges

Apple Braces for Potential Fourth Quarter Revenue Decline Amid Global Challenges

Rolls-Royce Restructuring: 2,500 Jobs on the Chopping Block!

Rolls-Royce Restructuring: 2,500 Jobs on the Chopping Block!

Dr. Martens Laces Up With New Repair Service To Embrace Sustainability

Dr. Martens Laces Up With New Repair Service To Embrace Sustainability

Swiftonomics Strikes: Taylor Swift’s Tour Boosts Hotel Bucks!

Swiftonomics Strikes: Taylor Swift’s Tour Boosts Hotel Bucks!

Apple’s China Wobble: When Politics Meets Tech!

Apple’s China Wobble: When Politics Meets Tech!

Arm’s Muscle Flex: A $50bn Chip Play on the Nasdaq!

Arm’s Muscle Flex: A $50bn Chip Play on the Nasdaq!

Luckin Coffee sells big on their new Boozy Brew

Luckin Coffee sells big on their new Boozy Brew

Lego Builds Success Despite Industry Decline

Lego Builds Success Despite Industry Decline

Pouring Money Down the Drain: The €200M Plan to Save Wine!

Pouring Money Down the Drain: The €200M Plan to Save Wine!

Inflation Takes a Breather: US Sees Lowest Annual Rate in Over Two Years

Inflation Takes a Breather: US Sees Lowest Annual Rate in Over Two Years

Oil Prices Bounce Back as Saudi Arabia Announces Major Output Cuts

Oil Prices Bounce Back as Saudi Arabia Announces Major Output Cuts

China’s Economic Recovery Boosts Sales for U.S. Companies

China’s Economic Recovery Boosts Sales for U.S. Companies

supermarket aisle during panic buying

UK Inflation on a Roll: Record Bread Prices Send Inflation Soaring

Green power surge: Renewables shatter records in 2022

Green power surge: Renewables shatter records in 2022

Is the government to blame for Indonesia’s surging rice prices?

Is the government to blame for Indonesia’s surging rice prices?

War in the EV market as Tesla slashes prices again

War in the EV market as Tesla slashes prices again

Funko Pop!’s biggest customer of the year so far… the trash can!

Funko Pop!’s biggest customer of the year so far… the trash can!

Canadian Alcohol consumption at historic lows

Canadian Alcohol consumption at historic lows

Tesla slashes China prices in the face of fierce domestic competition

Tesla slashes China prices in the face of fierce domestic competition

UK prices spiraling upwards as inflation hits 40-year high

UK prices spiraling upwards as inflation hits 40-year high

Tesla has its own law of demand – profits soaring despite higher prices!

Tesla has its own law of demand – profits soaring despite higher prices!

Filipino drivers to receive fuel subsidies as oil prices rise

Filipino drivers to receive fuel subsidies as oil prices rise

person holding smartphone

Uber prices in London set to increase after high court ruling

World’s major economies to release oil reserves to lower soaring oil prices

World’s major economies to release oil reserves to lower soaring oil prices

Saudi Aramco profits increase by almost 300%

Saudi Aramco profits increase by almost 300%

Groundbreaking new drug for Alzheimer’s is going to come at a cost!

Groundbreaking new drug for Alzheimer’s is going to come at a cost!

Container ship from above

An online shopping boom is fueling ships across the Pacific

an image of plastic bags in an overfilled bin

Paying for plastic bags has dramatically reduced usage in the UK

Nut prices are hitting rock bottom as global demand remains low

Nut prices are hitting rock bottom as global demand remains low

Recession proof coca-cola

Why does the recession proof Coca-Cola have so much cash?

Toilet paper shortage

Toilet paper manufacturer gets the go ahead to fill the shortage

French government to provide 8 billion euros to help revive their car industry

French government to provide 8 billion euros to help revive their car industry

British Supercar manufacturer McLaren to cut more than 25% of their workforce

British Supercar manufacturer McLaren to cut more than 25% of their workforce

an image of Canadian dollars as the economy experiences deflation

Deflation in Canada: why economists will tell you that falling prices is not something to be happy about

an image of barley harvesting after China imposes an 80% tariff on Australian Barley exports

China to impose an 80.5% tariff on Australian barley exports

an imge to show an empty shopping mall as retail sales plummet in the US

Declining rate of retail sales at a historic low as consumer confidence plummets in the US

an image to represent the American housing market

America’s housing market: increased demand but no response from supply

an image of an electric car charging as China announces more subsidies for electric cars

China to continue subsidising electric vehicles as the post Covid-19 recovery begins

an image of New York when the US economy contracted by 4.8%

Coronacrisis in the USA: negative growth and the worst decline since 2008

an image to show workers in an amazon warehouse

The more you sell the more it costs: Amazon have record sales but are paying the price for it

an image of a man holding maize as a food supply shortage emerges caused by covid-19

A Hunger pandemic could be the worst outcome of Covid-19 in the world’s poorest regions

an image of Netflix as global sales increase significantly

A tale of two businesses: winners and losers of a global lockdown

an image to show oil barrels the day that the price of oil went negative

Oil prices go negative in the US – how and why?

an image for article about OPEC reaching a deal to cut oil production by 10%

Global oil production to drop by 10% as OPEC agrees on an historic deal

an image to show how the demand for luxury goods is falling

Loo roll over Louis Vuitton: luxury brands amongst the hardest hit by Covid-19

an image to show the increasing demand for ramen

Ramen: the inferior good behaving like an… inferior good!

an image to show a petrol station the day petrol prices got closer to £1

Petrol prices plummeting towards £1 per litre as the price war for oil continues and drivers stay off the roads

An image of Dhaka in Bangladesh

Over a million clothing workers in Bangladesh have lost their jobs as Covid-19 brings the textile industry to a standstill

an image to show a pizza for the story about papa john's stock price

Who ordered pizza? Everyone it seems! Papa John’s sales in the US are expected to be up 5.3% this quarter

An image to show Chinese manufacturing opening up again

The factory of the world is firing up again: China records strong growth in manufacturing activity for March

An image of a glass of orange juice

Orange juice is the new king of commodities: prices set to soar!

Image of a coal mine

Coal: the world’s dirtiest and most damaging fossil fuel has now become the most expensive!

supermarket aisle during panic buying

We’ve heard about the toilet paper, but what else are people panic buying?

Hundreds of thousands of extra workers to be employed by online delivery companies

Hundreds of thousands of extra workers to be employed by online delivery companies

Bookies will lose billions as no sport means no bets are placed!

Bookies will lose billions as no sport means no bets are placed!

Korean Air forced to ground 80% of flights

Korean Air forced to ground 80% of flights

Lobster for dinner? This luxury treat is now selling at bargain prices!

Lobster for dinner? This luxury treat is now selling at bargain prices!

Crude Oil takes a 30% dive as Saudi Arabia gears up for a price war

Crude Oil takes a 30% dive as Saudi Arabia gears up for a price war

Paper gold: could the price of toilet paper be about to skyrocket?

Paper gold: could the price of toilet paper be about to skyrocket?

Is Germany’s ice wine production the latest victim of global warming?

Is Germany’s ice wine production the latest victim of global warming?

Coronacrisis in Japan: hotel is forced to file for bankruptcy

Coronacrisis in Japan: hotel is forced to file for bankruptcy

Falling phosphate exports from the disputed territory of Western Sahara

Falling phosphate exports from the disputed territory of Western Sahara

Corona Credit Crunch for many Chinese businesses

Corona Credit Crunch for many Chinese businesses

When supply outstrips demand: American wine at its lowest price in 20 years!

When supply outstrips demand: American wine at its lowest price in 20 years!

Oil prices make a 2% comeback after a 5-day slump

Oil prices make a 2% comeback after a 5-day slump

Supply of Malaysian Palm Oil fallen to two-year low

Supply of Malaysian Palm Oil fallen to two-year low

Korean exports continuing to plummet

Korean exports continuing to plummet

Research shows excise tax to reduce alcohol consumption

Research shows excise tax to reduce alcohol consumption

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