Day: July 18, 2019

Product X has a price elasticity of demand (PED) of – 3.0. Product Y has a PED of – 0.2.

Which combination of characteristics is correct?

Select ONE answer:

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

This multiple choice question is suitable for Economics KS5 classes.

The answer is 2

1. Product X may be a luxury but if Product Y is non-habit forming it is likely to have elastic demand rather than inelastic demand.
2. Correct: Product X has elastic demand whilst Product Y has inelastic demand. So Product X is likely to have substitutes while Product Y may be a necessity.
3. In this case, both products are likely to have inelastic demand, which is not the case with Product X.
4. Product X could be non-habit forming but it is not likely that Product Y is a luxury as luxuries tend to have elastic demand.

 

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