Sign in Subscribe

Year 12 Economics | Elasticity Worksheet

Last updated on 

Understanding PED

Work out the PED for each, and comment on your result.

  1. The price of DVDs was £200, and the quantity demanded was 4m. Next year the price falls to £180 and the quantity demanded rises to 6m.
  2. The price of Pens was £1, and the quantity demanded was 1m. Next year the price rises to £1.10 and the quantity demanded falls to 950,000.
  3. The price of The Times was 40p, and the quantity demanded was 2m. Next year the price falls to 30p and the quantity demanded rises to 2.2m
  4. WH Smith have recent reduced the price of its Kobo Mini eReader from £60 to £40. They predict that sales of the eReader will increase from 15,000 units a month to 25,000 a month. What is the price elasticity of demand for this price change?
  5. A business that makes suitcases aimed at holidaying tourists has increased its prices by 5%. As a consequence, they have seen a drop in sales between January and March by 15%. Calculate the price elasticity of demand and comment on the effect on revenue.

Price Elasticity of demand

Activity 2 

RCO Ltd is a UK based electronics manufacturer and retailer. Its main products are Netbook computers, PCs and Electronic Calculators.  The current price of the Netbook is £500, the PC is £800 and the calculator is £40. This year the firm sold 10,000 Netbooks, 20,000 PCs and 1 million calculators.

In an attempt to improve revenue the managers of the firm have decided to increase all prices by 10%. Market research has suggested that the price elasticity of demand for each product is:

Netbook: 1.5

PC: 2.5

Calculator:  0.6

You have been asked to evaluate the planned price increases. (Support any arguments with calculations.)

  1. Calculate the new quantity demanded for each product, after the 10% price increase.
  2. Calculate the new revenue for each product, after the 10% price increase.
  3. Work out whether the 10% price increase has been successful for each product (in terms of revenue) when compared before and after the price rise.

Understanding YED

Calculate the YED for the following situations and comment upon the result

  1. Consumer incomes increase from an average of 30,000 per year to 33,000 per year. During the same year, the demand for cheese increased from 2.8bn to 2.856bn. What was the YED for cheese during this particular year? What kind of good was cheese during this particular year?
  2. Consumer incomes increase from an average of 25,000 per year to 30,000 per year. During the same year, the demand for smartphones increased by 40%. What is the YED for smartphones during this particular year? What type of good was the smartphone during this particular year?
  3. Consumer incomes increase by 10%. During the same year, the demand for coach travel decreased by 3%. What is the YED for coach travel during this particular year? What type of good was coach travel during this particular year?

Understanding XED

  1. If the price of Coca Cola increases from 50p to 60p per can, and the demand for Pepsi Cola increases from 1m to 2m per year, the XED between the two products is? (Show your calculations and answer below) - What does this answer mean?
  2. If the price of Cinema Tickets increases from £5.00 to £7.50, and the demand for Popcorn decreases from 1000 tubs to 700, the XED between the two products will be? (Show your calculations and answer below) - What does this answer mean?

Mr Wilson’s Thinking Further Challenge…

Explain how a firm could use XED to increase revenues. For instance, Xbox One and PS4 consoles are usually sold at loss – why is this and can you think of any other similar examples of XED usage?