ATAR Notes: Forum
VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Economics => Topic started by: lnaa19 on November 11, 2012, 11:00:39 pm
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Hey guys.
From VCTA's 2011 exam, there's this MC question:
If the absolute value of the price elasticity of demand was added to the value of price elasticity of supply, which would have the highest total?
A. heroin
B. a fig
C. Coca Cola
D. a new Mini Cooper
The answer is 'D' but I don't understand what the question is asking. Can someone please explain to me? Thanks.
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-Price elasticity of demand measures the responsive of changes in quantity demand when price changes
-Price elasticity of supply measures the responsive of changes in quantity supplied when price changes
*Heroin - highly addictive (therefore, low demand elasticity), low PES (takes a while to produce, scarce - i assume) --- X
*A fig - low PED (consumes small proportion of income), low PES (lengthy production period) - - - X
*Coca Cola - low PED (addictive - may be a necessity in some cases, small proportion of income), High PES (durable, short production process) --- x
*Mini cooper - High PED (not a necessity, plenty of subs (MANY SMALL CARS ON MARKET) and if the price changes it consumes greater proportion of income)... High PES (durable) --- :)
D