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(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35118/unit-2111-market-power-theory-of-production-and-costs-hl.html" title="Unit 2.11(1) Market power - Theory of production and costs (HL)">Unit 2.11(1) Market power - Theory of production and costs (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35125/unit-2112-market-power-perfect-competitionhl.html" title="Unit 2.11(2) Market power - Perfect competition(HL)">Unit 2.11(2) Market power - Perfect competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35147/unit-2113-market-power-monopolyhl.html" title="Unit 2.11(3) Market power - Monopoly(HL)">Unit 2.11(3) Market power - Monopoly(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35151/unit-2114-market-power-monopolistic-competitionhl.html" title="Unit 2.11(4) Market power - Monopolistic competition(HL)">Unit 2.11(4) Market power - Monopolistic competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35153/unit-2115-market-power-oligopolyhl.html" title="Unit 2.11(5) Market power - Oligopoly(HL)">Unit 2.11(5) Market power - Oligopoly(HL)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41603/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43378/opportunity-cost-and-production-possibility-curves.html" title="Opportunity cost and production possibility curves">Opportunity cost and production possibility curves</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42559/demand-theory.html" title="Demand theory">Demand theory</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41886/the-price-mechanism.html" title="The price mechanism">The price mechanism</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43188/market-demand-and-supply.html" title="Market demand and supply">Market demand and supply</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41705/demerit-goods.html" title="Demerit goods">Demerit goods</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42275/market-failure-and-climate-change.html" title="Market failure and climate change">Market failure and climate change</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42925/market-power.html" title="Market power">Market power</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42099/applying-game-theory.html" title="Applying game theory">Applying game theory</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../34407/chapter-3-macroeconomics.html" title="Chapter 3: Macroeconomics">Chapter 3: Macroeconomics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34355/unit-311-measuring-the-level-of-economic-activity.html" title="Unit 3.1(1): Measuring the level of economic activity">Unit 3.1(1): Measuring the level of economic activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34432/unit-312-measuring-economic-development.html" title="Unit 3.1(2): Measuring Economic Development">Unit 3.1(2): Measuring Economic Development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34485/unit-321-variations-in-economic-activity-aggregate-demand-ad-.html" title="Unit 3.2(1): Variations in economic activity - aggregate demand (AD) ">Unit 3.2(1): Variations in economic activity - aggregate demand (AD) </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34487/unit-322-variations-in-economic-activity-aggregate-supplyas.html" title="Unit 3.2(2): Variations in economic activity - aggregate supply(AS)">Unit 3.2(2): Variations in economic activity - aggregate supply(AS)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34758/unit-331-macroeconomic-objectives-economic-growth.html" title="Unit 3.3(1) Macroeconomic objectives: economic growth">Unit 3.3(1) Macroeconomic objectives: economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34771/unit-332-macroeconomic-objectives-unemployment-.html" title="Unit 3.3(2) Macroeconomic objectives: unemployment ">Unit 3.3(2) Macroeconomic objectives: unemployment </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34778/unit-333-macroeconomic-objectives-inflation-and-deflation--1.html" title="Unit 3.3(3) Macroeconomic objectives: inflation and deflation ">Unit 3.3(3) Macroeconomic objectives: inflation and deflation </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34925/unit-341-economics-of-inequality-and-poverty-1.html" title="Unit 3.4(1) Economics of inequality and poverty">Unit 3.4(1) Economics of inequality and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34946/unit-342-policies-to-improve-equality-equity-and-poverty.html" title="Unit 3.4(2) Policies to improve equality, equity and poverty">Unit 3.4(2) Policies to improve equality, equity and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34993/unit-35-government-management-of-the-economy-monetary-policy-1.html" title="Unit 3.5 Government management of the economy – monetary policy">Unit 3.5 Government management of the economy – monetary policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34962/unit-36-government-management-of-the-economy-fiscal-policy-1.html" title="Unit 3.6 Government management of the economy – fiscal policy">Unit 3.6 Government management of the economy – fiscal policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35017/unit-371-market-based-supply-side-policies--1.html" title="Unit 3.7(1) Market based supply-side policies ">Unit 3.7(1) Market based supply-side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35018/unit-372-interventionist-supply-side-policies-.html" title="Unit 3.7(2) Interventionist supply-side policies ">Unit 3.7(2) Interventionist supply-side policies </a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45803/economics-real-world-examples-and-extension-material--1.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42639/measuring-economic-well-being-1.html" title="Measuring economic well-being">Measuring economic well-being</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43044/inflation.html" title="Inflation">Inflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42350/inequality.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41639/inequity-1.html" title="Inequity">Inequity</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../35414/chapter-4-the-global-economy.html" title="Chapter 4: The Global Economy">Chapter 4: The Global Economy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35346/unit-41-benefits-of-international-trade-1.html" title="Unit 4.1 Benefits of international trade">Unit 4.1 Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35348/unit-4243-trade-protectionism-1.html" title="Unit 4.2/4.3 Trade protectionism">Unit 4.2/4.3 Trade protectionism</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35407/unit-44-economic-integration-.html" title="Unit 4.4 Economic integration ">Unit 4.4 Economic integration </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35409/unit-45-exchange-rates-1.html" title="Unit 4.5 Exchange rates">Unit 4.5 Exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35413/unit-46-balance-of-payments--1.html" title="Unit 4.6 Balance of payments ">Unit 4.6 Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35675/unit-47-sustainable-development.html" title="Unit 4.7 Sustainable development">Unit 4.7 Sustainable development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35685/unit-48-measuring-development--1.html" title="Unit 4.8 Measuring development ">Unit 4.8 Measuring development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35687/unit-49-barriers-to-economic-development-1.html" title="Unit 4.9 Barriers to economic development">Unit 4.9 Barriers to economic development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35702/unit-410-economic-growth-and-economic-development-strategies.html" title="Unit 4.10: Economic growth and economic development strategies">Unit 4.10: Economic growth and economic development strategies</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45804/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41927/foreign-currency-1.html" title="Foreign currency">Foreign currency</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43532/exchange-rates-1.html" title="Exchange rates">Exchange rates</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43804/balance-of-payments.html" title="Balance of payments">Balance of payments</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41796/economic-development-1.html" title="Economic development">Economic development</a></li></ul></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../20132/units-1-2-microeconomics.html" title="Units 1-2: Microeconomics">Units 1-2: Microeconomics</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 1: Introduction to economics">Unit 1: Introduction to economics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20091/introductory-activity-1.html" title="Introductory activity">Introductory activity</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20093/unit-11-scarcity-choice-and-opportunity-cost.html" title="Unit 1.1: Scarcity, choice and opportunity cost">Unit 1.1: Scarcity, choice and opportunity cost</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21647/factors-of-production-1.html" title="Factors of production">Factors of production</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20114/economic-systems.html" title="Economic systems">Economic systems</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20134/public-and-private-sectors-1.html" title="Public and private sectors">Public and private sectors</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28055/unit-12-economics-as-a-social-science-1.html" title="Unit 1.2: Economics as a social science">Unit 1.2: Economics as a social science</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29921/circular-flow-of-national-income.html" title="Circular flow of national income">Circular flow of national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29829/unit-1-review-terms-1.html" title="Unit 1: Review terms">Unit 1: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41600/introduction-to-economics-crossword-1.html" title="Introduction to economics crossword">Introduction to economics crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../4331/unit-1-multiple-choice-quiz.html" title="Unit 1: Multiple choice quiz">Unit 1: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20177/unit-21-23-competitive-markets-demand-and-supply-1.html" title="Unit 2.1-2.3: Competitive markets - demand and supply">Unit 2.1-2.3: Competitive markets - demand and supply</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28517/unit-21-demand-1.html" title="Unit 2.1: Demand">Unit 2.1: Demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22349/determinants-of-demand-1.html" title="Determinants of demand">Determinants of demand</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29949/unit-22-supply-.html" title="Unit 2.2: Supply ">Unit 2.2: Supply </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20184/changes-to-supply-and-demand-.html" title="Changes to supply and demand ">Changes to supply and demand </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21992/practise-exercises-1.html" title="Practise exercises">Practise exercises</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../26112/gold-exchange-game-demand-and-supply-1.html" title="Gold exchange game: Demand and supply">Gold exchange game: Demand and supply</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20194/unit-23-competitive-market-equilibrium-1.html" title="Unit 2.3: Competitive market equilibrium">Unit 2.3: Competitive market equilibrium</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20144/producer-and-consumer-surplus-1.html" title="Producer and consumer surplus">Producer and consumer surplus</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22351/veblen-goods-and-super-luxury-goods-1.html" title="Veblen goods and super luxury goods">Veblen goods and super luxury goods</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25677/are-cryptocurrencies-the-new-tulipmania.html" title="Are Cryptocurrencies the new Tulipmania?">Are Cryptocurrencies the new Tulipmania?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20472/unit-21-23-multiple-choice-quiz.html" title="Unit 2.1-2.3: Multiple choice quiz">Unit 2.1-2.3: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20113/unit-24-consumer-and-producer-behaviour-hl-only-1.html" title="Unit 2.4: Consumer and producer behaviour (HL only)">Unit 2.4: Consumer and producer behaviour (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../36073/behavioural-economics-consumer-biases-nudge-theory-hl-only-1.html" title="Behavioural economics: Consumer biases / nudge theory (HL only)">Behavioural economics: Consumer biases / nudge theory (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20378/business-objectives-hl-only.html" title="Business objectives (HL only)">Business objectives (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28741/unit-21-24-review-terms--1.html" title="Unit 2.1-2.4: Review terms ">Unit 2.1-2.4: Review terms </a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20195/unit-25-26-elasticity-1.html" title="Unit 2.5-2.6: Elasticity">Unit 2.5-2.6: Elasticity</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28713/unit-25-price-elasticity-of-demand-1.html" title="Unit 2.5: Price elasticity of demand">Unit 2.5: Price elasticity of demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21545/determinants-of-price-elasticity-.html" title="Determinants of price elasticity ">Determinants of price elasticity </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21532/ped-elasticity-and-sales-revenue.html" title="PED elasticity and sales revenue?">PED elasticity and sales revenue?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21259/unit-25-income-elasticity-of-demand-yed.html" title="Unit 2.5: Income elasticity of demand (YED)">Unit 2.5: Income elasticity of demand (YED)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21200/unit-26-price-elasticity-of-supply.html" title="Unit 2.6: Price elasticity of supply">Unit 2.6: Price elasticity of supply</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20207/perfectly-elastic-inelastic-supply-curves.html" title="Perfectly elastic / inelastic supply curves">Perfectly elastic / inelastic supply curves</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20230/a-mathematical-note-about-elasticity-.html" title="A mathematical note about elasticity ">A mathematical note about elasticity </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39037/demand-and-supply-crossword.html" title="Demand and supply crossword">Demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29021/unit-25-26-review-terms-1.html" title="Unit 2.5-2.6: Review terms">Unit 2.5-2.6: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20474/unit-25-26-multiple-choice-quiz--1.html" title="Unit 2.5-2.6: Multiple choice quiz ">Unit 2.5-2.6: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44474/unit-21-25-competitive-markets-quiz-1.html" title="Unit 2.1- 2.5: Competitive markets quiz">Unit 2.1- 2.5: Competitive markets quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20243/unit-27-the-role-of-government-in-microeconomics--1.html" title="Unit 2.7: The role of government in microeconomics ">Unit 2.7: The role of government in microeconomics </a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26590/indirect-taxation.html" title="Indirect taxation">Indirect taxation</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20246/ped-and-the-burden-of-tax-hl-only-.html" title="PED and the burden of tax (HL only) ">PED and the burden of tax (HL only) </a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20277/government-subsidies--1.html" title="Government subsidies ">Government subsidies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29117/unit-27-indirect-tax-and-subsidy-review-terms-1.html" title="Unit 2.7: Indirect tax and subsidy review terms">Unit 2.7: Indirect tax and subsidy review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20287/price-controls-maximum-price--1.html" title="Price controls − maximum price ">Price controls − maximum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20288/minimum-price-.html" title="Minimum price ">Minimum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21540/minimum-wage-.html" title="Minimum wage ">Minimum wage </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38849/labour-market-crossword-1.html" title="Labour market crossword">Labour market crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29260/unit-27-price-controls-review-terms-1.html" title="Unit 2.7: Price controls review terms">Unit 2.7: Price controls review terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20303/unit-28-210-market-failure--1.html" title="Unit 2.8-2.10: Market failure ">Unit 2.8-2.10: Market failure </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21543/unit-28-merit-goods--1.html" title="Unit 2.8: Merit goods ">Unit 2.8: Merit goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23123/unit-28-demerit-goods-negative-externalities-1.html" title="Unit 2.8: Demerit goods / negative externalities">Unit 2.8: Demerit goods / negative externalities</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38850/market-failure-crossword-1.html" title="Market failure crossword">Market failure crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29262/unit-29-economics-of-the-environment-and-public-goods--1.html" title="Unit 2.9: Economics of the environment and public goods ">Unit 2.9: Economics of the environment and public goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20332/unit-210-asymmetric-information-hl-only-1.html" title="Unit 2.10: Asymmetric information (HL only)">Unit 2.10: Asymmetric information (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29828/unit-28-210-market-failure-review-sheet.html" title="Unit 2.8-2.10: Market failure review sheet">Unit 2.8-2.10: Market failure review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29827/unit-28-210-market-failure-review-terms.html" title="Unit 2.8-2.10: Market failure review terms">Unit 2.8-2.10: Market failure review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20479/unit-27-210-multiple-choice-quiz--1.html" title="Unit 2.7-2.10: Multiple choice quiz ">Unit 2.7-2.10: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44501/unit-27-210-government-failure-revision-quiz-1.html" title="Unit 2.7-2.10 Government failure revision quiz">Unit 2.7-2.10 Government failure revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20330/unit-211-market-power-hl-only-1.html" title="Unit 2.11: Market power (HL only)">Unit 2.11: Market power (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29835/assessment-map.html" title="Assessment map">Assessment map</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21528/production-hl-only.html" title="Production (HL only)">Production (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29978/revenue-theory-hl-only.html" title="Revenue theory (HL only)">Revenue theory (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20357/costs-of-production-hl-only.html" title="Costs of production (HL only)">Costs of production (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21286/economies-and-diseconomies-of-scale-hl-only.html" title="Economies and diseconomies of scale (HL only)">Economies and diseconomies of scale (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22494/long-run-average-cost-curves-hl-only.html" title="Long run average cost curves (HL only)">Long run average cost curves (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../29838/breakeven-hl-only.html" title="Breakeven (HL only)">Breakeven (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20340/economic-profit-hl-only.html" title="Economic profit (HL only)">Economic profit (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39082/market-power-crossword.html" title="Market power crossword">Market power crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22495/revision-exercise-on-cost-and-revenue-hl-only.html" title="Revision exercise on cost and revenue (HL only)">Revision exercise on cost and revenue (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29845/unit-211-costs-revenue-and-profit-review-sheet-hl-only.html" title="Unit 2.11: Costs, revenue and profit review sheet (HL only)">Unit 2.11: Costs, revenue and profit review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44484/unit-211-multiple-choice-quiz-sl-units-1.html" title="Unit 2.11: Multiple choice quiz (SL units)">Unit 2.11: Multiple choice quiz (SL units)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29846/market-structures-hl-only-1.html" title="Market structures (HL only)">Market structures (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29981/perfect-competition-hl-only-1.html" title="Perfect competition (HL only)">Perfect competition (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24486/profit-in-perfect-competition-hl-only-1.html" title="Profit in perfect competition (HL only)">Profit in perfect competition (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21302/efficiency-in-perfect-competition-hl-only.html" title="Efficiency in perfect competition (HL only)">Efficiency in perfect competition (HL only)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20430/monopoly-hl-only-1.html" title="Monopoly (HL only)">Monopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24529/profit-and-revenue-maximisation-in-monopoly-hl-only-1.html" title="Profit and revenue maximisation in monopoly (HL only)">Profit and revenue maximisation in monopoly (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21306/a-comparison-of-monopoly-and-perfect-competition-hl-only-1.html" title="A comparison of monopoly and perfect competition? (HL only)">A comparison of monopoly and perfect competition? (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20435/monopolistic-competition-hl-only-1.html" title="Monopolistic competition (HL only)">Monopolistic competition (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20436/oligopoly-hl-only-1.html" title="Oligopoly (HL only)">Oligopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22310/game-theory-hl-only-1.html" title="Game theory (HL only)">Game theory (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29918/unit-211-market-structures-review-sheet-hl-only-1.html" title="Unit 2.11: Market structures review sheet (HL only)">Unit 2.11: Market structures review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32337/unit-211-diagram-revision-.html" title="Unit 2.11: Diagram revision ">Unit 2.11: Diagram revision </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20480/unit-211-multiple-choice-quiz-hl-only-1.html" title="Unit 2.11: Multiple choice quiz (HL only)">Unit 2.11: Multiple choice quiz (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32425/unit-212-the-markets-inability-to-achieve-equity-hl-only-1.html" title="Unit 2.12: The market’s inability to achieve equity (HL only)">Unit 2.12: The market’s inability to achieve equity (HL only)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21842/unit-3-macroeconomics-.html" title="Unit 3: Macroeconomics ">Unit 3: Macroeconomics </a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../3942/unit-31-measuring-economic-activity-and-illustrating-its-variati-1.html" title="Unit 3.1: Measuring economic activity and illustrating its variations">Unit 3.1: Measuring economic activity and illustrating its variations</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20558/calculating-national-income-1.html" title="Calculating national income">Calculating national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21297/gdp-gni-as-a-measure-of-living-standards.html" title="GDP / GNI as a measure of living standards">GDP / GNI as a measure of living standards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20567/national-income-statistics-1.html" title="National income statistics">National income statistics</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21580/the-business-cycle-1.html" title="The business cycle">The business cycle</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29931/unit-31-economic-activity-review-sheet-1.html" title="Unit 3.1: Economic activity review sheet">Unit 3.1: Economic activity review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20592/unit-32-variations-in-economic-activityaggregate-demand-and-aggr-1.html" title="Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply">Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29933/aggregate-demand-and-supply.html" title="Aggregate demand and supply">Aggregate demand and supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21582/components-of-aggregate-demand-1.html" title="Components of aggregate demand">Components of aggregate demand</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20634/equilibrium-in-macroeconomics-neo-classical-perspective-1.html" title="Equilibrium in macroeconomics (neo-classical perspective)">Equilibrium in macroeconomics (neo-classical perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20439/equilibrium-in-macroeconomics-keynesian-perspective-1.html" title="Equilibrium in macroeconomics (keynesian perspective)">Equilibrium in macroeconomics (keynesian perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21349/john-maynard-keynes-1.html" title="John Maynard Keynes">John Maynard Keynes</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20650/keynesian-v-free-market-debate--1.html" title="Keynesian v free market debate ">Keynesian v free market debate </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21342/changes-in-the-long-run-aggregate-supply-1.html" title="Changes in the long run aggregate supply">Changes in the long run aggregate supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30055/unit-32-aggregate-demand-and-supply-review-sheet-1.html" title="Unit 3.2: Aggregate demand and supply review sheet">Unit 3.2: Aggregate demand and supply review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20610/unit-35-and-36-demand-management-fiscal-and-monetary-policy-1.html" title="Unit 3.5 and 3.6: Demand management - fiscal and monetary policy">Unit 3.5 and 3.6: Demand management - fiscal and monetary policy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30058/government-budget.html" title="Government budget">Government budget</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21585/fiscal-policy--1.html" title="Fiscal policy ">Fiscal policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21343/multiplier-hl-only.html" title="Multiplier (HL only)">Multiplier (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21795/monetary-policy--1.html" title="Monetary policy ">Monetary policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30071/independent-central-banks-1.html" title="Independent central banks">Independent central banks</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30083/unit-35-and-36-review-sheet.html" title="Unit 3.5 and 3.6 review sheet">Unit 3.5 and 3.6 review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20615/unit-37-supply-side-policies-1.html" title="Unit 3.7: Supply side policies">Unit 3.7: Supply side policies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20651/the-role-of-supply-side-policies-1.html" title="The role of supply side policies">The role of supply side policies</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20622/market-based-and-interventionist-supply-side-policies--1.html" title="Market based and interventionist supply side policies ">Market based and interventionist supply side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39129/aggregate-demand-and-supply-crossword-1.html" title="Aggregate demand and supply crossword">Aggregate demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30086/unit-37-review-sheet-1.html" title="Unit 3.7: Review sheet">Unit 3.7: Review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20755/unit-31-32-and-35-37-multiple-choice-quiz--1.html" title="Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz ">Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz </a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44522/unit-31-32-and-35-37-revision-quiz-1.html" title="Unit 3.1-3.2 and 3.5-3.7: Revision quiz">Unit 3.1-3.2 and 3.5-3.7: Revision quiz</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20686/unit-33-macroeconomic-objectives.html" title="Unit 3.3: Macroeconomic objectives">Unit 3.3: Macroeconomic objectives</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30118/unemployment.html" title="Unemployment">Unemployment</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21351/types-of-unemployment.html" title="Types of unemployment?">Types of unemployment?</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21593/equilibrium-unemployment-.html" title="Equilibrium unemployment ">Equilibrium unemployment </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21594/disequilibrium-unemployment-1.html" title="Disequilibrium unemployment">Disequilibrium unemployment</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30458/unemployment-review-sheet-1.html" title="Unemployment review sheet">Unemployment review sheet</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20713/inflation--1.html" title="Inflation ">Inflation </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20712/measuring-inflation-hl-only-1.html" title="Measuring inflation (HL only)">Measuring inflation (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20685/costs-of-inflation-and-deflation-1.html" title="Costs of inflation and deflation">Costs of inflation and deflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30465/inflation-review-sheet.html" title="Inflation review sheet">Inflation review sheet</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20716/unemployment-v-inflation-trade-off-hl-only-1.html" title="Unemployment v inflation trade off (HL only)">Unemployment v inflation trade off (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39133/macroeconomic-objectives-crossword-1.html" title="Macroeconomic objectives crossword">Macroeconomic objectives crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44511/unit-33-macroeconomic-indicators-revision-quiz-1.html" title="Unit 3.3: Macroeconomic indicators revision quiz">Unit 3.3: Macroeconomic indicators revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20741/unit-34-economics-of-inequality-and-poverty-1.html" title="Unit 3.4: Economics of inequality and poverty">Unit 3.4: Economics of inequality and poverty</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32398/inequality-1.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21356/the-role-of-spending-and-taxation-on-inequality--1.html" title="The role of spending and taxation on inequality ">The role of spending and taxation on inequality </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21313/consequences-of-economic-growth-1.html" title="Consequences of economic growth">Consequences of economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30257/economic-growth-and-inequality-review-sheet-1.html" title="Economic growth and inequality review sheet">Economic growth and inequality review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20756/unit-33-34-multiple-choice-.html" title="Unit 3.3-3.4: Multiple choice ">Unit 3.3-3.4: Multiple choice </a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21844/unit-4-global-economy.html" title="Unit 4: Global economy">Unit 4: Global economy</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21367/unit-41-benefits-of-international-trade.html" title="Unit 4.1: Benefits of international trade">Unit 4.1: Benefits of international trade</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30529/benefits-of-international-trade.html" title="Benefits of international trade">Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20823/absolute-and-comparative-advantage-hl-only-1.html" title="Absolute and comparative advantage (HL only)">Absolute and comparative advantage (HL only)</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20845/unit-42-43-trade-protection-1.html" title="Unit 4.2-4.3: Trade protection">Unit 4.2-4.3: Trade protection</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32419/barriers-to-trade-calculations-are-hl-only-1.html" title="Barriers to trade (calculations are HL only)">Barriers to trade (calculations are HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21610/case-study-on-tata-steel-1.html" title="Case study on Tata Steel">Case study on Tata Steel</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23455/the-defence-industry-1.html" title="The Defence industry">The Defence industry</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30610/unit-41-43-review-sheet-1.html" title="Unit 4.1-4.3: Review sheet">Unit 4.1-4.3: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20894/unit-44-economic-integration--1.html" title="Unit 4.4: Economic integration ">Unit 4.4: Economic integration </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30634/economic-integration-some-hl-tasks-1.html" title="Economic integration (some HL tasks)">Economic integration (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20840/world-trade-organisation-wto-1.html" title="World trade organisation (WTO)">World trade organisation (WTO)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30635/unit-44-review-sheet-1.html" title="Unit 4.4: Review sheet">Unit 4.4: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20853/unit-45-exchange-rates-1.html" title="Unit 4.5: Exchange rates">Unit 4.5: Exchange rates</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30611/floating-exchange-rates-1.html" title="Floating exchange rates">Floating exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../31824/fixed-managed-exchange-rate-systems-some-hl-tasks-1.html" title="Fixed / managed exchange rate systems (some HL tasks)">Fixed / managed exchange rate systems (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21624/the-market-for-foreign-exchange-1.html" title="The market for foreign exchange">The market for foreign exchange</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30614/unit-45-review-sheet-1.html" title="Unit 4.5: Review sheet">Unit 4.5: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20859/unit-46-balance-of-payments-1.html" title="Unit 4.6: Balance of payments">Unit 4.6: Balance of payments</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30624/balance-of-payments--1.html" title="Balance of payments ">Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21386/current-account-hl-only-1.html" title="Current account (HL only)">Current account (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20872/the-marshall-lerner-condition-j-curve-hl-only-1.html" title="The Marshall-Lerner condition / J curve (HL only)">The Marshall-Lerner condition / J curve (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20899/units-41-46-multiple-choice-quiz--1.html" title="Units 4.1-4.6: Multiple choice quiz ">Units 4.1-4.6: Multiple choice quiz </a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42989/unit-41-46-multiple-choice-quiz-ii-1.html" title="Unit 4.1-4.6: Multiple choice quiz II">Unit 4.1-4.6: Multiple choice quiz II</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../39438/unit-41-46-international-trade-crossword-1.html" title="Unit 4.1-4.6: International trade crossword">Unit 4.1-4.6: International trade crossword</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32423/unit-47-sustainable-development--1.html" title="Unit 4.7: Sustainable development ">Unit 4.7: Sustainable development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26092/water-scarcity-activity-1.html" title="Water scarcity activity">Water scarcity activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32426/sustainable-development.html" title="Sustainable development">Sustainable development</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20928/unit-48-measuring-development--1.html" title="Unit 4.8: Measuring development ">Unit 4.8: Measuring development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30686/measuring-development-1.html" title="Measuring development">Measuring development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21627/economic-development--1.html" title="Economic development ">Economic development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30679/unit-47-48-review-sheet.html" title="Unit 4.7-4.8: Review sheet">Unit 4.7-4.8: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 4.9: Barriers to development">Unit 4.9: Barriers to development</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30727/barriers-to-development-in-international-trade-1.html" title="Barriers to development in International trade">Barriers to development in International trade</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32430/unit-410-economic-growth-andor-economic-development-strategies-1.html" title="Unit 4.10: Economic growth and/or economic development strategies">Unit 4.10: Economic growth and/or economic development strategies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30687/the-role-of-domestic-factors-1.html" title="The role of domestic factors">The role of domestic factors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30688/the-role-of-international-trade-and-development-1.html" title="The role of international trade and development">The role of international trade and development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30689/the-role-of-foreign-direct-investment-fdi-1.html" title="The role of foreign direct investment (FDI)">The role of foreign direct investment (FDI)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25240/the-role-of-foreign-aid--1.html" title="The role of foreign aid ">The role of foreign aid </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30819/multilateral-development-assistance-1.html" title="Multilateral development assistance">Multilateral development assistance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21632/the-role-of-international-debt-1.html" title="The role of international debt">The role of international debt</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25242/the-balance-between-markets-and-intervention-1.html" title="The balance between markets and intervention">The balance between markets and intervention</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30926/unit-49-410-review-sheet.html" title="Unit 4.9 - 4.10: Review sheet">Unit 4.9 - 4.10: Review sheet</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21380/assessment.html" title="Assessment">Assessment</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Internal assessment ">Internal assessment </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20608/how-to-write-your-ia-student-handout.html" title="How to write your IA? 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<div id="main-column" class="span9"> <article id="unit-251-price-elasticity-of-demand-ped" style="margin-top: 16px;">
<h1 class="section-title">Unit 2.5(1): Price elasticity of demand (PED)</h1>
<ul class="breadcrumb"><li><a title="Home" href="../../../economics.html"><i class="fa fa-home"></i></a><span class="divider">/</span></li><li><span class="gray">Textbook</span><span class="divider">/</span></li><li><span class="gray">Chapter 2: Microeconomics</span><span class="divider">/</span></li><li><span class="active">Unit 2.5(1): Price elasticity of demand (PED)</span></li></ul>
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<div class="intro-card"><div class="bg-cover" style="background-image: url("/media/ib/economics/images/textbook/ped/luxury-inferior.jpg");"></div><img src="../../../ib/economics/images/textbook/ped/luxury-inferior.jpg" style="display: none"><div class="content"><p class="text">Elasticity is an economic concept based on change. It measures how consumers and producers respond to changes in variables that affect demand and supply. Elasticity is important because it allows us to analyse what happens to demand and supply in markets when change takes place and to evaluate the consequences of change.</p></div></div><div class="box"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h3><strong>What you should know by the end of this chapter:</strong></h3></div></div><img alt="" height="200" src="../../../ib/economics/images/textbook/ped/pedc.png" style="float: right;" width="292"></div><ul><li>Concept of elasticity</li><li>Price elasticity of demand (PED)</li><li>Degrees of PED: theoretical range of values for PED</li><li>Changing PED along a straight line downward sloping demand curve (HL)</li><li>Determinants of PED: number and closeness of substitutes, degree of necessity, the proportion of income spent on the good, time</li><li>Relationship between PED and total revenue</li><li>Importance of PED for business and government decision making</li><li>PED of primary goods and manufactured goods</li></ul></div><div class="greyBg"><h3>Revision material</h3><p><img alt="" src="../../../ib/economics/images/textbook/revision-material/logo.jpg" style="width: 200px; height: 95px; float: left;">The link to the attached pdf is revision material from <strong>Unit 2.5(1): Price elasticity of demand (PED)</strong>. The revision material can be downloaded as a student handout.</p><p><a href="../../../media/ib/economics/images/textbook/ped/new-elasticity/revision-notes.pdf.html" target="_blank" title="Revision"><img class="ico" src="../../../thinkib/icons/revision.png"> Revision notes</a></p></div><hr class="hidden"><div class="blueBg"><h3><strong>Elasticity</strong></h3><p>Elasticity is an economic concept based on change. It measures how consumers and producers respond to changes in variables that affect demand and supply. Elasticity is important because it allows us to analyse what happens to demand and supply in markets when change takes place and to evaluate the consequences of change. For example, when the price of electricity rises we can use elasticity to analyse how consumers and producers will respond to the rise in price. </p><h4><strong>Definition and measurement of price elasticity of demand</strong><img alt="" height="289" src="../../../ib/economics/images/textbook/ped/picture-2.png" style="float: right;" width="446"></h4><p>Price elasticity of demand is the responsiveness of quantity demanded for a good to a change in its price. It is measured by the equation: </p><p>% change in Qd / % change in P</p><p>For example, if the price of film and TV streaming services such as Netflix increases from $20 per month to $24 (20 per cent increase) and quantity demanded falls from 10 million subscribers to 7.5 million subscribers (25 per cent decrease). This is shown in diagram 2.15 and is calculated as:</p><p>-25% QD / +20% P = -1.25 or 1.25 (PED)</p><hr class="hidden"><h4><strong>Interpretation</strong></h4><p>The value of PED is normally negative because of the law of demand. The negative value is often ignored because the PED value is nearly always negative. In future calculations, the PED will be expressed as a positive value.</p><h4><strong>Price elastic demand</strong></h4><p>If the PED value is greater than 1 then the good’s demand is price elastic. This means a change in price leads to a proportionately greater change in quantity demanded. In the film and TV streaming service example, the value is 1.25 which means for every 1% increase in price, the quantity demanded decreases by 1.25%. This is a price elastic relationship because the proportionate change in quantity demanded is greater than the proportionate change in price.</p><p>Theoretically, the demand curve can be perfectly horizontal or perfectly elastic. This gives a PED of infinity. This is applicable in the theoretical market form of perfect competition.</p><h4><strong>Unitary elasticity of demand <img alt="" height="244" src="../../../ib/economics/images/textbook/ped/picture-3.png" style="float: right;" width="383"></strong></h4><p>If the PED value is 1 then PED is unitary. This means that for every 1 per cent change in price quantity demanded changes by 1%. It is unlikely a good will have a PED of 1 but the value could be close to 1. This is shown by a demand curve which is a rectangular hyperbola and is represented in diagram 2.16.</p><hr class="hidden"><h4><strong>Price inelastic demand</strong></h4><hr class="hidden"><p><strong><img alt="" height="261" src="../../../ib/economics/images/textbook/ped/picture-4.png" style="float: left;" width="407"></strong></p><p>If the demand for a good has a PED value of less than 1 then it is price inelastic. This means that a change in the price of a good leads to a less than proportionate change in quantity demanded. For example, if the price of rice rises from $0.50 to $0.55 and the quantity demanded falls from 4m units to 3.8m then the PED of rice is calculated as:</p><p>-5% QD / +10% P = 0.5 (PED)</p><hr class="hidden"><p>The PED value of 0.5 means for every 1% change in the price of rice, the quantity demanded changes by 0.5%. This is shown in diagram 2.17. In theory, a perfectly vertical demand curve represents perfectly inelastic demand. This gives a PED of 0.</p><hr class="hidden"><h4><strong>Demand curves with differing elasticities<img alt="" height="251" src="../../../ib/economics/images/textbook/ped/picture-5.png" style="float: right;" width="384"></strong></h4><p>Diagram 2.18 shows demand curves of different slopes to represent different PEDs. A horizontal demand curve is perfectly elastic (D) and with a relatively flat gradient (D1) is relatively elastic. A vertical demand curve (D3) is perfectly inelastic and one which has a relatively steep gradient is inelastic.</p><hr class="hidden"><p>All demand curves (except the perfect ones) have a PED that changes from elastic to inelastic as the price of the good is reduced and this is shown in diagram 2.18. The demand curves that represent elastic and inelastic demand situations are useful for illustrating the effects of price changes.</p></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" style="background-color: rgb(39, 45, 105);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><h4><strong>Inquiry case example - Price elasticity and ticket pricing</strong></h4></div></div></div><p><img alt="" src="../../../ib/economics/images/textbook/ped/new-elasticity/rams.jpg" style="float: left; width: 300px; height: 232px;">The American NFL team, The Los Angeles Rams have written to their season ticket holders to announce they are raising ticket prices by 8% next season. The team’s owners are confident they can achieve this price increase following the team’s on-field success as winners of the Super Bowl. The Rams are led by wide receiver Cooper Kupp, named the Most Valuable Player 2022.</p><hr class="hidden"><p>It is interesting to analyse the PED of the demand for Los Angeles Rams season tickets. The average price of the ticket is $118 so an 8% price increase is going to add over $9 to the selling price of a ticket. The team’s home games often sell out and the number of tickets sold is not expected to fall significantly. This may imply that the demand for the Rams tickets is price inelastic because the people who buy the team's season tickets are very brand loyal to the Rams.</p><p><a href="../../../media/ib/economics/images/textbook/ped/new-elasticity/rams-tickets.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></p><h5>Questions</h5><p><strong>a. Outline what you understand by price inelastic demand. [2]</strong></p><section class="tib-hiddenbox"><p>Price inelastic demand means that a change in price causes a less than proportionate change in quantity demanded. The demand for a good is price inelastic when the value of PED is less than 1.</p></section><p><strong>b. The Los Angeles Rams have increased their average ticket price (which was $118) by 8% and this has caused the quantity demanded for tickets to fall by 2%. The quantity demand before the change in price was 70,000.</strong></p><p><strong>(i) Calculate the new selling price for the tickets. [2]</strong></p><section class="tib-hiddenbox"><p>$118 x 1.08 = $127.44</p></section><p><strong>(ii) Calculate the new quantity demand for the tickets. [2]</strong></p><section class="tib-hiddenbox"><p>70,000 x 0.98 = 68,600</p></section><p><strong>(iii) Calculate the PED of Los Angeles Rams tickets. [2]</strong></p><section class="tib-hiddenbox"><p>-2% / +8% = 0.25 or -0.25</p></section><p><strong>c. Outline what price inelastic demand for Los Angeles Rams tickets means. [2]</strong></p><section class="tib-hiddenbox"><p>Price inelastic demand for Los Angeles Rams tickets means a change in the price of the tickets leads to a less than proportionate change in the quantity demanded for the tickets.</p></section><h5>Investigation</h5><p><strong>Investigate the demand for tickets of other major sports teams to see where PED follows a similar pattern to The Los Angeles Rams. </strong></p></div><hr class="hidden"><div class="blueBg"><h4><strong>Elasticity along the demand curve</strong></h4><p>As the price of a good decreases along the demand curve the PED value falls. Diagram 2.19 illustrates the demand curve for training shoes. As the price of the shoes falls from $50 to $45 the quantity demand increases from 2m units to 3m units. This is a PED of:</p><p>+50% QD/ -10% P = 5 (price elastic)</p><p>On the upper section of the demand curve, PED is price elastic.</p><p>When the price of the training shoes is reduced from $20 to $15 the quantity demanded rises by 8m to 9m units. This is a PED of:</p><p>+12.5% QD / -25% P = 0.5 (price inelastic)</p><p><img alt="" height="287" src="../../../ib/economics/images/textbook/ped/picture-7.png" style="float: right;" width="445"></p><p>PED falls as you move down the demand curve because a change in price at a relatively high price level has a greater proportionate effect on quantity demanded than the effect of a change in price at a relatively low price. On the upper section of the demand curve in diagram 2.19, PED is price elastic because of the way percentages are calculated. A $5 price reduction from a price of $50 is a smaller percentage change than a $5 price reduction from a $20 price.</p><hr class="hidden"><p>Similarly, a 1m quantity increase from 2m to 3m is a larger percentage increase than a 1m increase from 8m to 9m. When the PED is calculated it will have a greater value at higher prices on the demand curve and a smaller value at lower prices. </p><hr class="hidden"><h4><strong>Determinants of price elasticity of demand</strong></h4><h5><strong>Number and closeness of substitutes</strong></h5><p>The greater the<strong><img alt="" height="142" src="../../../ib/economics/images/textbook/ped/picture-16.png" style="float: left;" title="https://www.shelflife.ie/lock-stock-and-biscuit-barrel/" width="383"></strong> number of close substitutes a product has the more price elastic its demand tends to be because consumers can easily swap between alternatives when the price of the good changes. </p><hr class="hidden"><p>This relates to the way you define the market for a good: the more precisely defined the market for a good, the more close substitutes it tends to have. There are many different brands of biscuits on the shelf of a supermarket, so any one brand of biscuit tends to be relatively price elastic. A rise in the price of Oreo biscuits, for example, may well lead to consumers switching to alternative brands such as Jaffa Cakes. If the market definition broadened from brands of biscuits to biscuits as a product, then there are fewer close substitutes (chocolate bars, crisps, cakes, etc.) and the demand for biscuits will be more inelastic.</p><h5 id="header-18"><strong>Luxury or necessity</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p>The demand for goods that are a necessity for a consumer tends to be more price inelastic than the demand for luxury products which tend to be more price elastic. This is because consumers need to keep buying necessity goods when their price increases. For example, if the price of electricity rises, quantity demand will fall by a proportionately smaller amount because people still need to use electricity to light their homes and run their appliances. Consumers do not, on the other hand, need to keep consuming luxury products if their price increases. For example, if the price of long-haul air tickets increases, people can take fewer holiday flights and the quantity demanded would fall by a relatively greater amount. </p><h5 id="header-19"><strong>Proportion of income <img alt="" height="227" src="../../../ib/economics/images/textbook/ped/picture-17.png" style="float: right;" title="https://www.nouvelle-epicerie.fr/en/divers/1009-hollywood-chewing-gum-chlorophylle-1u-3014680004521.html" width="174"></strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p>The demand for goods that account for a smaller proportion of household income tends to be more price inelastic. This is because any change in price will have a relatively small impact on household income. For example, consumers might spend a relatively small amount of their income on chewing gum each month, whereas they might spend a larger proportion of their income on train travel. A 20 per cent increase in the price of $1 a pack of chewing gum is likely to have a smaller impact on consumer income than a 20 per cent increase in the price of a $15 daily train ticket, so the PED of chewing gum tends to be more inelastic than the train tickets.</p><hr class="hidden"><h5 id="header-20"><strong>Type of consumer</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p>High-income consumers tend to be less responsive to price changes for goods than people on lower incomes. This is because any price change will have a smaller real income effect on high-income consumers compared to low-income consumers. For example, if the price of a prestige watch rises from $2000 to $2500 then it may have little impact on a wealthy buyer who has an income of a million US$ per year. This is why the demand for luxury goods sold to wealthy individuals tends to be relatively price inelastic. The demand for high-end fashion labels such as Prada and Armani have relatively inelastic demand for their goods because they are targeted at wealthy consumers.</p><div class="panel panel-has-footer" style="box-shadow: rgba(51, 0, 0, 0.3) 0px 10px 30px -15px; border-color: rgb(124, 7, 21);"><div class="panel-body"><div></div></div></div></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" id="header-21" style="background-color: rgb(39, 45, 105);"><div style="display: inline-block;"><h4 id="header-22"><strong>Inquiry case example - Pricing airline tickets</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h4></div></div><h4 id="header-23"></h4></div><hr class="hidden"><p><img alt="" height="94" src="../../../ib/economics/images/textbook/ped/picture-8(1).png" title="https://www.britishairways.com/travel/home/public/en_be?&Brand=Y&DM1_Channel=PPC&DM1_Mkt=BE&DM1_Campaign=EUNAF_BE_EN_FLIGHTS_PUREBRAND_MASTERBRAND&SEO=N&DM1_Keyword=ba%20flights&gclid=Cj0KCQiAnL7yBRD3ARIsAJp_oLaJ0ijG0HTLuoTnF3kt5BnfDh5fgGiM6r9YeL35-4tUyPtOGAT8tiQaAvBcEALw_wcB&gclsrc=aw.ds/" width="774"></p><p>The chart above shows the price of a return airfare between Milan and New York. The price differs significantly between the three classes of tickets. As price increases, you would normally expect the demand for a good to become more price elastic. We would also expect luxury goods to be more price elastic. The pricing strategy of British Airways suggests that demand for airline tickets becomes more inelastic as the price increases. This is partly because of the type of consumer who buys business class compared to economy tickets. A high-income business consumer is willing to pay a higher price for the ticket, particularly if their employer is paying for the cost of it. Economy ticket buyers may well be on lower incomes and as such be more sensitive to price changes.</p><p><a href="../../../media/ib/economics/images/textbook/ped/new-elasticity/airline-tickets.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></p><h5 id="header-24">Questions <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p>The PED data for the different classes of air tickets on the Milan to New York flight is economy -1.89, premium economy -1.52 and business -0.92. </p><p><strong>a. Calculate the change in quantity demanded for each class of ticket if BA increases the ticket price for all classes of tickets by 8%. [3]</strong></p><section class="tib-hiddenbox"><ul><li>Economy -1.89 x 8% = -15.12%</li><li>Premium -1.52 x 8% = -12.16%</li><li>Business -0.92 x 8% = -7.36%</li></ul></section><p><strong>b. Explain why the demand for economy tickets tends to be more price elastic than business class tickets. [4]</strong></p><section class="tib-hiddenbox"><p>The demand for economy tickets tends to be more price elastic than business class tickets because:</p><ul><li>Economy class tickets tend to be bought by individuals with lower incomes than business class travellers and a change in price has a bigger income effect on economy ticket buyers.</li><li>Air travel is more of a luxury for economy travellers who often travel for leisure and a necessity for business travellers who travel for work.</li></ul></section><p><strong>c. Explain what might happen to the PED of airline tickets sold by BA if a competing airline such as Virgin withdrew their Milan to New York flight from the market. [4]</strong></p><section class="tib-hiddenbox"><p>If Virgin withdrew from the Milan to New York ticket market this would reduce the number of substitutes in the market BA would have to compete with on this route. Fewer substitutes would make the demand for BA flights more price inelastic because travellers would have a reduced number of options to choose from if the price of BA flights changed.</p></section><p><strong>d. Explain how the number of substitutes for a good and whether the good is a luxury or necessity affects its price elasticity of demand. [10 marks]</strong></p><section class="tib-hiddenbox"><ul><li>Definitions of substitutes, PED, luxury good, necessity good.<img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/ped-question-airlines.jpg" style="float: right; width: 400px; height: 262px;"></li><li>A demand and supply diagram showing the change in the price of a good with different elasticities of demand.<hr class="hidden"> The diagram shown has a demand curve for a good with relatively price elastic demand because it is a luxury and has a large number of substitutes</li><li>An explanation that the more substitutes there are for a good the more price elastic the demand for it tends to be because buyers can more easily substitute towards or away from a good when its price changes.<hr class="hidden"></li><li>An explanation that luxury goods tend to have more price elastic demand compared to necessity goods because consumers are more likely to stop/start buying luxury goods when the price rises/falls relative to necessity goods.</li><li>An example of goods and services whose demand is relatively elastic/inelastic because they have many/few substitutes and are luxuries/necessities. This might include using the airline industry by looking at the number of substitutes for a type of flight and whether an airline ticket is a luxury or a necessity for a particular consumer. </li></ul></section><strong>Investigation</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small><p><strong>Look at the websites of other major airlines to see the different ticket prices for the same flights. </strong></p></div><div class="blueBg"><h5 id="header-26"><strong>Time<img alt="" height="276" src="../../../ib/economics/images/textbook/ped/time-and-ped1.jpg" style="float: right;" width="429"></strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p>Over time PED tends to become more price elastic because consumers can alter their consumption patterns in response to a price change. In the short run an increase in the price of petrol, for example, will lead to a relatively small decrease in the quantity demanded because petrol buyers can cut back on some leisure journeys, but they still have to get to work and take their children to school.</p><hr class="hidden"><p>In the long run, buyers could change to a more fuel-efficient car and move to a house nearer to where they work. Thus the demand for petrol becomes more price elastic in the long run.</p><hr class="hidden"><p>Diagram 2.20 shows how the PED for petrol increases from:</p><p>-25% QD / +20% P = 1.25 PED to</p><p>-60% QD/ +20% P = 3 PED</p><hr class="hidden"><h4 id="header-28"><strong>Price elasticity of demand and revenue</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h4><p>Revenue is the value of income a business receives from selling a good. It is calculated by:</p><p>price x quantity = total revenue</p><p>For example, an airline sells 500,000 seats a year at a price of $200 then the total revenue is:</p><p>500,000 x $200 = $100,000,000</p><p>Firms can use an understanding of PED to increase their total revenue. When the demand for a good is price elastic, total revenue rises when the price is reduced and decreases when the price is increased. When the demand for a good is inelastic, total revenue rises when the price is increased and decreases when the price is reduced. </p><p>An airline <img alt="" height="208" src="../../../ib/economics/images/textbook/ped/picture-10.png" style="float: left;" title="https://www.britishairways.com/travel/home/public/en_be?&Brand=Y&DM1_Channel=PPC&DM1_Mkt=BE&DM1_Campaign=EUNAF_BE_EN_FLIGHTS_PUREBRAND_MASTERBRAND&SEO=N&DM1_Keyword=ba%20flights&gclid=Cj0KCQiAnL7yBRD3ARIsAJp_oLaJ0ijG0HTLuoTnF3kt5BnfDh5fgGiM6r9YeL35-4tUyPtOGAT8tiQaAvBcEALw_wcB&gclsrc=aw.ds/" width="301">sells seats to a holiday destination. Ticket A is sold during the school summer holidays when demand is relatively price inelastic because families need to travel at that time and the seats are considered a relative necessity. Ticket B is sold outside school holiday time when demand is relatively price elastic because people do not have to travel at that time and seats are considered more of a luxury.</p><hr class="hidden"> <p><img alt="" height="244" src="../../../ib/economics/images/textbook/ped/picture-15.png" style="float: left;" width="420">The table shows the price, quantity and revenue for tickets A and B before and after a 20 per cent increase in the price of seat tickets from time period year 1 to time period year 2. The total revenue for ticket A, which has price inelastic demand, increases by $128,000 and the total revenue for ticket B, which has price elastic demand, decreases by $84,000.</p><hr class="hidden"><img alt="" height="263" src="../../../ib/economics/images/textbook/ped/ped-inelastic-revenue.jpg" style="float: right;" width="405"><p>Diagram 2.21 shows how an increase in price for seat ticket A leads to a rise in total revenue. Area EFBG shows the total revenue after the price increase which is greater than area ABCD, which is the total revenue before the price increase.</p><hr class="hidden"><img alt="" height="258" src="../../../ib/economics/images/textbook/ped/picture-12.png" style="float: left;" width="402">Diagram 2.22 shows how an increase for seat ticket B leads to a fall in total revenue. Area ABCD shows the total revenue before the price increase, which is greater than area EFBG which represents the total revenue after the price increase.<hr class="hidden"><h4 id="header-29"><strong>The impact on total revenue of changes in PED along the demand curve<img alt="" height="397" src="../../../ib/economics/images/textbook/ped/picture-13.png" style="float: right;" width="397"></strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h4><p>The business response to PED could be to make a judgement about the PED of the demand for the good they sell and then increase or decrease the price of their good in order to increase revenue and hopefully profits. It is important to remember that PED changes as you move along the demand curve and this will affect the revenue from a price change. In diagram 2.23 we can see that a rise in the price of the airline seat ticket with inelastic demand will lead to an increase in total revenue, but as PED rises the rate of increase of total revenue will slow down and peak when PED is unitary. Any increase in price as we move onto the elastic section of the demand curve will lead to a fall in revenue. The same thing happens if the price is reduced on the elastic section of the demand curve. Revenue rises and peaks when PED is unitary and then falls when PED is inelastic.</p></div><div class="pinkBg"><div class="panel panel-has-footer" style="box-shadow: rgba(17, 34, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" id="header-30" style="background-color: rgb(39, 45, 105);"><div style="display: inline-block;"><h4 id="header-31"><strong>Inquiry case example - Rising revenues at Aldi</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h4></div></div></div><p>Revenu<strong><img alt="" height="160" src="../../../ib/economics/images/textbook/ped/picture-14.png" style="float: left;" title="https://www.aldi.co.uk/" width="246"></strong>es at the UK and Irish arm of the German supermarket chain jumped by almost 17% in 2019 as sales rose to £10.2bn. Aldi’s price-cutting approach has drawn in more than one million new customers, helping to increase sales at established stores alongside their new openings. Aldi has become Britain’s fifth biggest supermarket with more than 775 stores in the UK and Ireland, pushing its share of the grocery market to 7.6%.</p><hr class="hidden"><p>Aldi’s price strategy is to be very competitive on price and reduce their price below their competitors to drive up revenues and profits. The business has been successful where demand is price elastic because of the number of close substitutes it has in this highly competitive market.</p><p>Reducing prices may be one of the key reasons for seeing Aldi’s revenues rise. It may also be worth thinking about other factors that could have increased Aldi’s revenues such as advertising and the quality of their stores. You might also consider why the demand for Aldi’s products is price elastic when it sells so many necessity goods.</p><p><a href="../../../media/ib/economics/images/textbook/ped/new-elasticity/aldi-elasticity.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></p><h4><strong>Questions</strong></h4><p><strong>a. Define the term total revenue. [2]</strong></p><section class="tib-hiddenbox"><p>Revenue is the value of income a business receives from selling a good. It is calculated in the following way:</p><p>price x quantity = total revenue</p></section><p><strong>b. Using a diagram, explain how the high level of competition in the market Aldi operates in would make the demand for the goods it sells relatively price elastic. [4]</strong></p><section class="tib-hiddenbox"><p><img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/soup.jpg" style="float: right; width: 400px; height: 257px;">Because there is a high level of competition in the market Aldi operates in there will be many close substitutes for the goods Aldi sells. If there are many close substitutes for a good it makes the demand for the good price elastic because consumers can easily switch between alternatives when prices change. The diagram shows a relatively elastic demand curve for canned soup sold by Aldi. When the price of the soup increases quantity demanded falls more than proportionately.</p><hr class="hidden"></section><p><strong>c. The price of washing powder Aldi sells is $2 and the quantity demanded per week is 5000 units. The price of the washing powder falls to $1.80 and the PED of the washing powder is -1.2. </strong></p><p><strong>(i) Calculate the weekly change in total revenue Aldi receives from the washing powder. [4] </strong></p><section class="tib-hiddenbox"><ul><li>Original total revenue: $2 x 5000 = $10000</li><li>Change in quantity demanded -10% (change in price) x -1.2 (PED) = +12% (change in Qd)</li><li>New quantity demanded: 1.12 x 5000 = 5600</li><li>New revenue: $1.80 x 5600 = $10080</li><li>An increase of $80</li></ul></section><p><strong>(ii) Outline the relationship between price elasticity of demand for a good and changes in total revenue when the price of the good increases. [2]</strong></p><section class="tib-hiddenbox"><ul><li>When the demand for a good is price elastic an increase in price decreases total revenue.</li><li>When the demand for a good is price inelastic an increase in price increases total revenue.</li></ul></section><h5 id="header-33"><strong>Investigation</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p><strong>Visit your local supermarket and research the pricing of different types of goods. Make a list of 5 goods where you would expect demand to be price elastic and 5 goods where you would expect demand to be inelastic. </strong></p></div><div class="blueBg"><h3 id="header-34"><strong>Government decision-making and price elasticity of demand</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h3><p>PED will be useful to governments when they are making policy decisions that affect the price of goods and services. PED will have an effect on tax, subsidy, maximum price and minimum price decisions made by governments. The specific effects of PED on these policies are covered in <strong>Unit 2.7 Governments and markets</strong>.</p><h4 id="header-35"><strong>The price elasticity demand of commodities compared to manufactured goods </strong><img alt="" height="227" src="../../../ib/economics/images/textbook/ped/picture-18.png" style="float: right;" title="https://www.amazon.com/Bombay-Basmati-Rice-Brown-2lb/dp/B003Q1KYSS" width="214"> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h4><p>Economists are often concerned with the differences in PED between commodities and manufactured goods. The demand for agricultural goods tends to be relatively inelastic because they are often necessities and have fewer close substitutes compared to manufactured goods. If the price of a commodity such as rice increases then households reduce the quantity demanded by a proportionately smaller amount than the increase in price. This is because households depend on rice as part of their diet and there are relatively few close substitutes for it.</p><hr class="hidden"><p><img alt="" height="212" src="../../../ib/economics/images/textbook/ped/picture-19.png" style="float: left;" title="https://www.currys.co.uk/gbuk/index.html" width="167">Manufactured goods such as personal computers (PCs) are often relative luxuries so the demand for them tends to be more price elastic. The demand for manufactured goods is also considered price elastic because of the number of substitutes they have. If the price of a PC rises people could buy a substitute for a PC like a new mobile phone or tablet computer.</p><hr class="hidden"><h4 id="header-36"><strong>Evaluating price elasticity of demand </strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h4><p>PED is used extensively by businesses looking to increase revenue and profit from their pricing strategies. There are, however, some limitations to PED:</p><ul><li>It can change over time as consumer behaviour changes. A new competitor might enter the market for a good which makes the PED for a good more elastic.</li><li>PED is based on the ceteris paribus assumption that price is the only variable that is changing. Income and the price of related goods, as well as other factors that affect demand, are all changing at the same time as the price of the good.</li><li>When a firm changes price there is always going to be uncertainty about how consumers will react. If the price of a good rises above its anchor point then the quantity demanded might fall more than expected.</li></ul></div><div class="pinkBg"><div class="panel" style="box-shadow: rgba(0, 0, 19, 0.3) 0px 10px 30px -15px; border-color: rgb(39, 45, 105);"><div class="panel-heading" id="header-37" style="background-color: rgb(39, 45, 105);"><div style="display: inline-block;"><p>Inquiry case example - The price elasticity of demand for oil</p></div></div></div><p><img alt="" src="../../../ib/economics/images/textbook/ped/new-elasticity/opec.jpg" style="float: right; width: 400px; height: 267px;" title="https://www.worldoil.com/news/2022/7/14/opec-faces-a-near-impossible-production-task-next-year/">13 countries are members of the Organisation of the Petroleum Exporting Countries (OPEC). This is an organisation formed in 1960 to regulate the supply of oil to main price stability in its market. Member countries include Algeria, Iran, Nigeria, Saudi Arabia and Venezuela. In July of 2020, OPEC decided to cut the supply of oil by 9.7 barrels per day to force the oil price higher.</p><hr class="hidden"><p>By the end of December, the price of a barrel of oil had increased to just over $50 from a low of $20 in April. Throughout 2021 and 2022 the price of oil has continued to rise because of the global economic recovery from the pandemic and geopolitical factors related to the conflict in Ukraine. Oil is currently trading at around $100 a barrel which has significantly increased the revenues of OPEC countries.</p><p>Source: CNBC adapted</p><p><a href="../../../media/ib/economics/images/textbook/ped/new-elasticity/oil-price.pdf.html" target="_blank" title="Questions"><img class="ico" src="../../../thinkib/icons/question.png"> Worksheet questions</a></p><h5 id="header-38"><strong>Questions</strong> <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p><strong>a. Explain two reasons why the price elasticity of demand for commodities tends to be price inelastic. [10]</strong></p><section class="tib-hiddenbox"><div class="hidden-content" id="hiddenBoxContent1" style=""><p>Answers might include:<img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/oil-price-ped.jpg" style="float: right; width: 400px; height: 258px;"></p><ul><li>Definitions of PED, price inelastic demand and commodities.</li><li>Diagram to show price inelastic demand for oil.</li><li>Explanation that the demand for commodities tends to be inelastic because they are often necessity goods.</li><li>Explanation that the demand for commodities tends to be inelastic because they have relatively few substitutes.<hr class="hidden"></li></ul></div></section><p><strong>b. Using a real-world example, evaluate the usefulness of price elasticity of demand for producers trying to increase their revenues by raising prices. [15]</strong></p><section class="tib-hiddenbox"><p>Answers might include:<img alt="" src="../../../ib/economics/images/textbook/inquiry-case-example-questions/ped-oil.jpg" style="float: right; width: 400px; height: 259px;"></p><ul><li>Definitions of PED and revenues.</li><li>A diagram to show an increase in revenues as the price of oil rises.</li><li>An explanation that if producers increase the price of oil this will lead to an increase in revenue because the demand for oil is price inelastic. As the price of oil increases in the diagram the revenue producers receive from selling oil increases from area ABCD to area BGEF.</li></ul><hr class="hidden"><hr class="hidden"><ul><li>An example of OPEC increasing the price of oil by cutting its supply to increase revenue.</li><li>Evaluation/synthesis might include the problem of accurately measuring the PED of oil which makes forecasting the change in revenue difficult to predict. In addition, changes in non-price factors such as income might be affecting demand and oil revenues. PED also tends to become more elastic in the long run which will have an impact on revenues.</li></ul></section><ul></ul><h5 id="header-39">Investigation <small class="toc-back-button"> <a class="scroll-to" data-target="toc-1657977387" href="https://www.thinkib.net/#" title="Back to table of contents"> </a> </small></h5><p><strong>Research into the organisation OPEC. How effective do you think it is in managing the price of oil?</strong></p></div><div class="blueBg"><div class="panel-heading" id="header-40" style="background-color: rgb(124, 7, 21);"><div style="display: inline-block;"><h3><span style="color:#FFF0F5;">Thinking about a key concept - Equity</span></h3></div></div><div class="panel-body"><div><p>The high price of particular goods and services in the economy can have a significant impact on certain groups of consumers. Housing, transport and energy are three necessities for nearly all households in society, but the prices of these necessities are particularly important to households on low incomes. The demand for these goods also tends to be price inelastic because they are necessities. So when rents, train fares and electricity bills rise in an economy it can have a very negative effect on the poorest in society who spend a high proportion of their income on these goods. </p><p><strong>If you were in a low-income household what would you spend less on when the price of necessities like housing, transport and energy increased in price?</strong></p></div></div></div><div class="tib-quiz" data-quiz-id="990" data-structure="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" data-score-answers="6d4a526a457a48584f763758344a7649472f76324c53614b78524c393439595570496d5a5971374b38686f3d"><div class="exercise"><div class="q-question"><p>Which of the following equations is used to calculate the PED for good A?</p></div><div class="q-answer"><p><label class="radio" data-answer="74df66e0ea9b909f75f903f97f44aa10"><input type="radio"><span> % change in P B / % change in Qd A</span></label></p><p><label class="radio" data-answer="d14fb0f63f1aedf0567361a451cf7b16"><input type="radio"><span>% change in Qd A / % change in P A</span></label></p><p><label class="radio" data-answer="aa22bd2128c67f972927339766753593"><input type="radio"><span> change in Qd A / change in P A</span></label></p><p><label class="radio" data-answer="f47a19f4931fb1da271df0c74c6045f0"><input type="radio"><span> % change in Qd A / % change in P B</span></label></p></div><div class="q-explanation"><p> </p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>If the price of a type of pizza rises from <dollar>$</dollar>8 to <dollar>$</dollar>9 and its quantity demanded falls from 20,000 units to 16,000 units, what is the PED for this type of pizza?</p></div><div class="q-answer"><p><label class="radio" data-answer="b0888d686e89bf883fe90b85c9220b47"><input type="radio"><span> 0.16</span></label></p><p><label class="radio" data-answer="d62c232f0b3e8fb5da7db1ff61509b94"><input type="radio"><span> 6.25</span></label></p><p><label class="radio" data-answer="4341447b6ad78bf4d7eb59ebb5a53d63"><input type="radio"><span> 1.6</span></label></p><p><label class="radio" data-answer="3bd2a01cf8d7f2c39060b76f286628c8"><input type="radio"><span> 0.625</span></label></p></div><div class="q-explanation"><p> -20% / +12.5% = 1.6 or -1.6</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>If the PED of a brand of training shoe is 1.3. Which of the following is not true?</p></div><div class="q-answer"><p><label class="radio" data-answer="b350df84c4ddaffe3155795c3907e099"><input type="radio"><span> The demand for the training shoes can be described as price elastic</span></label></p><p><label class="radio" data-answer="3736e37ef89629a880e5a718130993bb"><input type="radio"><span> For every 1% change in the price of the brand of training shoes, quantity demanded changes by 1.3%</span></label></p><p><label class="radio" data-answer="869c36a39061ae6678ff1d79d54f18fb"><input type="radio"><span> If the price of the training shoe falls by 20% the Qd rises 26%</span></label></p><p><label class="radio" data-answer="5698e164a7fe8b617442f86efd496ce8"><input type="radio"><span> A fall in the price of the training shoes leads to a fall in total revenue</span></label></p><p> </p></div><div class="q-explanation"><p> When PED is price elastic a fall in price leads to a rise in revenue.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following statements is true about the determinants of PED?</p></div><div class="q-answer"><p><label class="radio" data-answer="758242fdb504fd93cdb0367a525313da"><input type="radio"><span> The PED for a good tends to fall over time</span></label></p><p><label class="radio" data-answer="85688bcf2fffa8765f8cd8e2ca92f1c7"><input type="radio"><span> The more substitutes a good has the greater its PED</span></label></p><p><label class="radio" data-answer="5a1bbae61c282ff95ee6cf12d7041a30"><input type="radio"><span> Necessity goods tend to have price elastic demand</span></label></p><p><label class="radio" data-answer="9692a085ad72cbb7254670f591be9bec"><input type="radio"><span>If a good or service accounts for a higher proportion of household income its PED is more likely to be inelastic</span></label></p></div><div class="q-explanation"> </div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>The diagram shows the price of a good falling from P to P1. Which of the following is not true?</p><p><img alt="" src="../../../ib/economics/images/textbook/mc-questions/ped.jpg" style="width: 282px; height: 181px; float: left;"></p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p></div><div class="q-answer"><p> </p><p><label class="radio" data-answer="9e72683821c5480375c545778374270f"><input type="radio"><span> If the price change is on the price inelastic section of the demand curve, total revenue falls</span></label></p><p><label class="radio" data-answer="08937a697649391c3ed5f401248497e8"><input type="radio"><span> The PED of the good falls</span></label></p><p><label class="radio" data-answer="e818bbb442f81fe25bc5a4a865c94fa8"><input type="radio"><span> The PED of the good rises</span></label></p><p><label class="radio" data-answer="940f833140d786352b22b8e10ca95da2"><input type="radio"><span> If the price change is on the price elastic section of the demand curve, total revenue rises</span></label></p></div><div class="q-explanation"><p>As price falls along a downward sloping demand curve PED falls.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>The price of good B falls from <dollar>$</dollar>40 to <dollar>$</dollar>30 and the quantity demanded for good B rises from 200,000 units to 300,000 units. Which of the following is true?</p></div><div class="q-answer"><p><label class="radio" data-answer="67470ebc0919e7f7dc38f435148f6949"><input type="radio"><span> PED of good B is less than 1</span></label></p><p><label class="radio" data-answer="cef8f6e1e527f1518a9beb1fbfdd65f1"><input type="radio"><span> Good B is a necessity good</span></label></p><p><label class="radio" data-answer="497daabf29ddb843a10e423d849ba0e4"><input type="radio"><span>Total revenue of good B falls</span></label></p><p><label class="radio" data-answer="899c9286884a59dae1bc8cedb2e53641"><input type="radio"><span>PED of good B decreases as the price decreases</span></label></p></div><div class="q-explanation"><p>When the price of a good falls PED falls along a demand curve.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>If the PED of a good is -0.4 and the quantity demand increases by 22% when the price of the good changed. Which of the following is the percentage change in price?</p></div><div class="q-answer"><p><label class="radio" data-answer="6a2f38112859eee5b83cf5496e59ddf3"><input type="radio"><span> +55%</span></label></p><p><label class="radio" data-answer="94f414fda4abc46030f7caf44a6bd73c"><input type="radio"><span> -55%</span></label></p><p><label class="radio" data-answer="d7ba0b7cfeee0faefe706cdfe77fefb5"><input type="radio"><span> -8.8%</span></label></p><p><label class="radio" data-answer="dc5094cc43ea7ff1513689686d2b346e"><input type="radio"><span>+8.8%</span></label></p></div><div class="q-explanation"><p> +22% / -0.4 = -55%</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following would not be a reason why the PED of a commodity such as rice tends to be price inelastic?</p></div><div class="q-answer"><p><label class="radio" data-answer="5f90842b22dbce3897cbaada973c73e0"><input type="radio"><span>Rice has few close substitutes</span></label></p><p><label class="radio" data-answer="83eac45ad201f0ed9e2dd864ab3783d7"><input type="radio"><span>Rice can account for a high proportion of household incomes</span></label></p><p><label class="radio" data-answer="341e95a8599eef9f349cc5e6d87ab135"><input type="radio"><span>Rice is a relative necessity</span></label></p><p><label class="radio" data-answer="471fdef19437075dce7c391cd1a50a26"><input type="radio"><span>Rice can have a relatively low price</span></label></p></div><div class="q-explanation"><p>If rice accounts for a high proportion of household income its demand will be relatively price elastic.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>Which of the following products would you expect to have the most inelastic demand following a price change?</p></div><div class="q-answer"><p><label class="radio" data-answer="9402041e5b59035aaa39d0e9d0438e11"><input type="radio"><span> Holiday to Spain</span></label></p><p><label class="radio" data-answer="1965c12ca41cc4a2e006a3de13530e56"><input type="radio"><span> Household electricity</span></label></p><p><label class="radio" data-answer="90e90e86f9def6d5283a9015940c26e4"><input type="radio"><span> Computer game console</span></label></p><p><label class="radio" data-answer="f5ea44f9d023091639fd94cf0acbb0e9"><input type="radio"><span> Restaurant meal</span></label></p></div><div class="q-explanation"><p>Household electricity is a relative necessity compared to the other goods.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="exercise"><div class="q-question"><p>A hotel discounted its room rates at weekends from <dollar>$</dollar>100 per night to <dollar>$</dollar>60 and total revenue for the hotel at the weekend increased from <dollar>$</dollar>8,500 to <dollar>$</dollar>11,300. Which of the following is most likely to be the price elasticity of demand for the hotel rooms at weekends? </p></div><div class="q-answer"><p><label class="radio" data-answer="8c6f41ea057a07d53836805f058b3d5f"><input type="radio"><span> Price elastic</span></label></p><p><label class="radio" data-answer="5931960528acc228773f8c7e8cfed1fd"><input type="radio"><span> Price inelastic</span></label></p><p><label class="radio" data-answer="d2c02d6cb1a79635a96086219af8ccfe"><input type="radio"><span> Unit elastic</span></label></p><p><label class="radio" data-answer="b3369a3c2683f131ee412ac76822c4a3"><input type="radio"><span> Perfectly elastic</span></label></p></div><div class="q-explanation"><p>Price elastic because as price decreases revenue increases.</p></div><div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div><p> </p><div class="totals"><span class="score">Total Score: </span><button class="btn btn-success check-total"><i class="fa fa-check-square-o"></i> Check</button></div></div><hr><script>document.querySelectorAll('.tib-teacher-only').forEach(e => e.remove());</script>
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