Day: December 21, 2017

Economics Multiple Choice Question – 21 December 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

A 2% cut in price leads to a 6% increase in sales.

What is the price elasticity of demand?

Select ONE answer:

  1. +3
  2. +0.333
  3. -3
  4. -0.333
  5. 30

Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – The formula for calculating the price elasticity of demand is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price. If PED > 1, then demand responds more than proportionately to a change in price i.e. demand is elastic. For example, if a 10% increase in the price of a good leads to a 30% drop in demand. The price elasticity of demand for this price change is –3. In this example PED is equal to +6% / – 2% or -3

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