law of demand
What happens to demand when the price of a product increases, all else being equal?
demand decreases
This kind of elasticity means any price increase will cause demand to drop to zero.
perfectly elastic
If demand doesn’t change at all when price changes, the demand is called this.
perfectly inelastic
company wants to increase total revenue. Should they raise prices if their product is elastic?
no, because demand will drop significantly
What is the general shape (slope) of the demand curve?
negative
What is the PED if price increases by 10% and demand falls by 20%?
-2
Products with many substitutes usually have this kind of demand.
elastic
A pharmaceutical drug with no alternative experiences a price increase, but demand doesn’t fall. Explain.
because this is the example of perfectly inelastic good
This principle explains why people buy more when prices are lower.
law of demand
product is unitary elastic when the percentage change in price equals this.
the percentage change in quantity demanded
basic food items are examples of this type of product in terms of elasticity
inelastic
A product is unitary elastic. What happens to total revenue if price increases?
stays the same
The demand curve shows the relationship between these two variables
price and quantity of demand
If the price of a product changes by 1%, and demand changes by more than 1%, the product is considered this.
elastic
If the price of coffee rises by 10% and people buy 20% less, what type of elasticity is this?
elastic
You sell a product that is perfectly elastic. What happens if you raise the price?
consumers stop buying it