With the help of a formula, explain what is meant by the term price elasticity of demand for a product and consider the extent to which it allows an entrepreneur to determine the effect of price changes on the total expenditure on their product.

Economics

IGCSE&ALevel

CAIE

Exam No：9708_w23_qp_22 Year：2023 Question No：2(a)

Answer:

2.2.1 definition of price elasticity, income elasticity and cross elasticity of demand (PED, YED, XED)

2.2.2 formulae for and calculation of price elasticity, income elasticity and cross elasticity of demand

2.2.3.1 price elasticity of demand

2.2.3.2 income elasticity of demand

2.2.3.3 cross elasticity of demand

2.2.4 descriptions of elasticity values: perfectly elastic, (highly) elastic, unitary elasticity, (highly) inelastic, perfectly inelastic

2.2.5 variation in price elasticity of demand along the length of a straight-line demand curve

2.2.6.1 price elasticity of demand

2.2.6.2 income elasticity of demand

2.2.6.3 cross elasticity of demand

2.2.7 relationship between price elasticity of demand and total expenditure on a product

2.2.8 implications for decision-making of price elasticity, income elasticity and cross elasticity of demand