What does the Price Elasticity of Demand (PED) measure?

The change in quantity demanded in response to price changes

The total revenue generated by a firm

Which factor contributes to higher price elasticity of demand (PED)?

High addictiveness of the product

Low availability of substitutes

Price represents a large proportion of income

Why is price elasticity of demand important for businesses?

It helps in determining tax rates

It determines the government subsidies

It affects the cost of production

In which scenario would a firm likely increase prices according to the total revenue rule?

When there are many substitutes available

When consumers have a higher income

How does time period affect price elasticity of demand?

Short term shows higher elasticity

Short term shows lower elasticity

Long term shows higher elasticity

Long term shows lower elasticity

What does a demand curve with high elasticity indicate?

Consumers are responsive to price changes

Consumers are not affected by price changes

There are no substitutes available

The product is essential and addictive

How can governments use knowledge of PED for taxation purposes?

Tax products with elastic demand more

Tax products with inelastic demand more

What is a strategy businesses can use based on price elasticity of demand?

Increase prices for elastic products

Decrease prices for inelastic products

Increase prices for all products

Decrease prices for all products

Why is understanding PED crucial for governments?

It helps in setting maximum prices

It guides decisions on subsidies

It determines import/export policies

What does price inelastic demand imply for a product?

Consumers are highly responsive to price changes

Consumers are not affected by price changes

Consumers buy less when prices increase

Consumers buy more when prices increase

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