Introduction to Elasticity in Economics

The video tutorial explains the concept of elasticity, focusing on price elasticity of demand. It covers the law of demand, demand curves, and how different goods respond to price changes. The elasticity formula is introduced, emphasizing the importance of proportionate change and initial values. Examples illustrate these concepts, highlighting the significance of understanding elasticity in economics.

What is the primary focus of elasticity in economics?

• The change in supply over time

• The responsiveness of demand to price changes

• The increase in production costs

• The stability of market prices

According to the law of demand, what happens when the price of a good increases?

• The quantity demanded increases

• The quantity demanded decreases

• The supply of the good increases

• The supply of the good decreases

How does an elastic good respond to a price increase compared to an inelastic good?

• An elastic good's demand decreases significantly

• An elastic good's demand remains unchanged

• An inelastic good's demand increases significantly

• An inelastic good's demand decreases significantly

What does elasticity measure in terms of variables?

• The absolute change in variables

• The responsiveness of one variable to changes in another

• The total value of variables

• The average value of variables

In the context of elasticity, what does the term 'proportionate change' refer to?

• The change in quantity demanded

• The absolute change in price

• The change in supply

• The change relative to the initial value

What is the formula for price elasticity of demand (PED)?

• Change in price divided by change in quantity demanded

• Proportionate change in quantity demanded divided by proportionate change in price

• Total quantity demanded divided by total price

• Initial price divided by initial quantity demanded

Why is the initial value important in calculating proportionate change?

• It is used to calculate total change

• It is irrelevant to the calculation

• It affects the relative size of the change

• It determines the absolute change

What happens to the proportionate change when the initial price is high?

• The proportionate change is equal to the absolute change

• The proportionate change is unaffected

• The proportionate change is smaller

• The proportionate change is larger

In the example of a chocolate bar and a computer, why does a £1 increase affect them differently?

• Because the chocolate bar is more expensive

• Because the computer is less expensive

• Because the initial price of the computer is much higher

• Because the chocolate bar is a luxury item

What is the key takeaway about elasticity from this unit?

• Elasticity is only about price changes

• Elasticity only applies to supply

• Elasticity is irrelevant in economics

• Elasticity measures the responsiveness of variables