Elasticity of Demand — Flashcards
ICSE · Class 10 · Economic Application
40 flashcards for Elasticity of Demand (ICSE Class 10 Economic Application) to test yourself on key terms and facts.
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What is elasticity of demand?
Answer
Elasticity of demand measures the amount of change in quantity demanded of a commodity in response to a change in its price. It is a quantitative concept because it is measured in numbers. Example: if…
Why is price elasticity of demand called a quantitative concept?
Answer
It is called a quantitative concept because it measures responsiveness of demand in numerical form. It does not describe demand only as high or low; it shows how much quantity demanded changes when pr…
Who developed the concept of price elasticity of demand?
Answer
Alfred Marshall developed the concept of price elasticity of demand as the ratio of a relative change in quantity demanded to a relative change in price. He is also known as Dr. Marshall in this chapt…
State the formula for price elasticity of demand by the percentage method.
Answer
The formula is: Ed = Percentage change in demand for the good / Percentage change in price of the good. It can also be written as Ed = ΔQ/ΔP × P/Q after the 100s cancel out. This method compares relat…
How is the percentage method simplified after cancelling the 100s?
Answer
The formula becomes Ed = ΔQ/ΔP × P/Q. Here, ΔQ means change in quantity demanded, ΔP means change in price, P means original price, and Q means original quantity demanded.
What does Ed = 1 mean?
Answer
Ed = 1 means demand is unit elastic. In this case, percentage change in demand is equal to percentage change in price. According to Dr. Marshall, total expenditure remains the same even when price cha…
What does Ed greater than 1 mean?
Answer
When Ed is greater than 1, demand is elastic. This means the percentage change in quantity demanded is greater than the percentage change in price. A small price change causes a larger demand change.
What does Ed less than 1 mean?
Answer
When Ed is less than 1, demand is inelastic. This means the percentage change in quantity demanded is smaller than the percentage change in price. Demand changes only a little when price changes.
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