Elasticities of Demand

With the help of a formula, explain what is meant by price elasticity of demand for a product and consider the importance of time in determining whether demand for the product is likely to be relatively price elastic or relatively price inelastic.

Assess whether knowledge of a product’s income elasticity of demand is more important to a firm producing it than knowledge of its cross elasticity of demand.

With the help of a diagram, explain the difference between producer surplus and consumer surplus and consider the extent to which producers always gain when the price of a product increases due to higher costs of production.

Assess the view that a business should be more concerned about the income elasticity of demand for its product than its cross elasticity of demand when incomes are falling.

With the help of a formula, explain the meaning of income elasticity of demand and consider the extent to which a rise in income will increase the consumption of all goods and services.

Assess whether an estimate of the price elasticity of demand for a product is likely to be more useful to a firm than an estimate of its price elasticity of supply.

With the help of a formula, explain what is meant by the income elasticity of demand for a product and consider the extent to which demand for the product will always rise at the same rate as the income of its consumers.

Assess the extent to which price elasticity of supply or cross elasticity of demand is more useful to businesses.

With the help of a diagram(s), briefly explain how the cause of a movement along the demand curve differs from the cause of a shift in the demand curve and consider the impact on the demand for one good of price changes in other goods.

Assess whether knowledge of income elasticity of demand or price elasticity of demand for its product is more useful to a business aiming to increase the total expenditure on its product during a period of economic growth.

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.

Assess whether the concept of price elasticity of supply or cross elasticity of demand will be more useful to a business wanting to increase its total sales in a growing economy.

With the help of diagrams, use the concept of income elasticity of demand to explain the impact of a fall in incomes on the equilibrium price and equilibrium quantity of a normal good and an inferior good.

Discuss the difficulties that businesses might have when they try to control the factors that determine the price elasticity of demand for a product and consider whether attempts to control these factors are likely to be successful.

Explain two factors that will determine the price elasticity of demand for a particular brand of car and how this price elasticity of demand may change over time.

Discuss whether knowledge of price elasticity of demand or income elasticity of demand would be of greater use to a business that produces cars.

With the aid of diagrams, explain how consumer surplus is affected by a decrease in the price of a luxury product with many substitutes, and of an essential product with few substitutes.

Discuss the extent to which knowledge of the income elasticity of demand for its product is likely to be more useful to a business than knowledge of the cross elasticity of demand for its product.

Explain how the concept of cross-elasticity of demand can be used to distinguish between goods that are substitutes, those that are complements and those that have no relationship.

An economy is experiencing a fall in average incomes during a severe recession.

Discuss the extent to which the concepts of income elasticity of demand and price elasticity of demand might be useful to an entrepreneur in this economy and consider which would be more useful.