TCE Economics — Level 3
Price Elasticity of Demand — Flashcards & Quiz
Price elasticity of demand (PED) measures how responsive quantity demanded is to a change in price. For TCE Economics Level 3 you need to calculate PED, classify demand as elastic or inelastic, explain its determinants, and apply it to firm revenue and tax policy decisions. Elasticity is a quantitative concept — confident exam responses show the working and link the number to a business or government choice.
Sample Flashcards
Q1: Define price elasticity of demand (PED) and explain the categories.
PED measures the responsiveness of quantity demanded to a change in price. Formula: PED = % change in Qd / % change in P. Categories: elastic (PED > 1, Qd very responsive), inelastic (PED < 1, Qd less responsive), unit elastic (PED = 1), perfectly elastic (PED = ∞, horizontal), perfectly inelastic (PED = 0, vertical). PED is always negative but often expressed as an absolute value.
Sample Quiz Questions
Q1: If PED is 0.3, demand is described as price elastic.
Answer: FALSE
PED of 0.3 means demand is price INELASTIC (PED < 1). Quantity demanded is relatively unresponsive to price changes.
Last updated: March 2026 · 1 flashcards · 1 quiz questions