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VICEconomicsQuick questions
Unit 3: Australia's economic prosperity
Quick questions on Price elasticity of demand and supply (VCE Economics Unit 3)
7short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is price elasticity of demand defined?Show answer
Price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in the price of the good.
What is price elasticity of supply defined?Show answer
Price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price.
What is tax incidence?Show answer
When the government applies an indirect tax, the share borne by consumers versus producers depends on relative elasticities.
What are price controls?Show answer
The effect of a minimum or maximum price depends on elasticity. A minimum wage causes more unemployment where labour demand is elastic; a price ceiling on rent causes larger shortages where supply is inelastic.
What is q1?Show answer
Define price elasticity of demand and state the formula. [2 marks]
What is q2?Show answer
A 10 percent rise in the price of a good causes quantity demanded to fall by 4 percent. Calculate the PED and state whether demand is elastic or inelastic. [2 marks]
What is q3?Show answer
Explain, using the concept of elasticity, why an indirect tax on tobacco raises large government revenue while a similar tax on a good with many substitutes would not. [4 marks]
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