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Dividing one percentage change by another leaves an elasticity coefficient with no units."},{"text":"It has price units because price is usually one part of the ratio.","correct":false,"explanation":"Price units do not remain in an elasticity coefficient because elasticity uses percentage changes. The units cancel, leaving a unit-free ratio."},{"text":"It has quantity units because quantity is usually one part of the ratio.","correct":false,"explanation":"Quantity units are removed when quantity is expressed as a percentage change. Since both parts are percentages, the coefficient has no units."},{"text":"It has the same units as the variable causing the change.","correct":false,"explanation":"Elasticity is not measured in the units of its causal variable. Percentage changes make the ratio unit-free, regardless of whether the variable is measured in pounds or tonnes."}]},{"id":"6ff57e52-9721-4aee-9f63-cda01067feb8","cardType":"basic","points":1,"front":"What does the sign of an elasticity coefficient show?","back":"The sign shows the direction of the relationship.","mcqOptions":[{"text":"The sign shows the direction of the relationship.","correct":true,"explanation":"The sign indicates whether the two percentage changes move in the same direction or in opposite directions, revealing the relationship between the variables."},{"text":"The sign shows the size of the response.","correct":false,"explanation":"The size or absolute value indicates the strength of the response. The sign only shows whether the relationship is positive or negative."},{"text":"The absolute value shows the direction of the relationship.","correct":false,"explanation":"The absolute value removes the sign, so it measures strength rather than direction. The sign itself shows the direction of the relationship."},{"text":"The units show the direction of the relationship.","correct":false,"explanation":"Elasticity coefficients have no units, and units cannot show the direction of a relationship. Direction is communicated by whether the coefficient is positive or negative."}]},{"id":"5871aacd-49c5-49dd-95aa-a35ac464fd4f","cardType":"basic","points":1,"front":"What does the size of an elasticity coefficient show?","back":"The absolute value shows the strength of the response.","mcqOptions":[{"text":"The absolute value shows the strength of the response.","correct":true,"explanation":"Taking the absolute value removes the direction and shows how strongly one percentage change responds to another. A larger absolute value means a stronger response."},{"text":"The sign shows the strength of the response.","correct":false,"explanation":"The sign indicates direction, not strength. The absolute value of the elasticity coefficient shows how strongly one variable responds to a change in another."},{"text":"The absolute value shows the units of the response.","correct":false,"explanation":"Elasticity coefficients are unit-free, so their absolute values cannot show units. The absolute value measures the strength of the response."},{"text":"The percentage change shows the strength of the response.","correct":false,"explanation":"A percentage change describes the change in one variable, but elasticity measures responsiveness relative to another percentage change. Its absolute value shows response strength."}]},{"id":"988e6bb1-044f-473b-ae7b-8e2dcbab6514","cardType":"basic","points":1,"front":"Why can an absolute change give a misleading comparison?","back":"A large absolute change can be a small percentage of a large base.","mcqOptions":[{"text":"A large absolute change can be a small percentage of a large base.","correct":true,"explanation":"The same absolute change represents different proportions of different bases. A large change may therefore be relatively small when compared with a very large starting value."},{"text":"A large absolute change can be a large percentage of a large base.","correct":false,"explanation":"A large base usually makes a given absolute change a smaller percentage, not a larger one. Percentage changes provide the fairer comparison."},{"text":"A small absolute change can be a small percentage of a small base.","correct":false,"explanation":"A small base makes an absolute change relatively larger, not necessarily smaller. This is why percentage changes are needed when comparing responses."},{"text":"An equal absolute change is always an equal percentage of different bases.","correct":false,"explanation":"Equal absolute changes produce different percentages when the starting bases differ. The base size determines how significant the absolute change is proportionally."}]},{"id":"b587468d-bca1-423e-a1ff-b30d3fae2163","cardType":"basic","points":1,"front":"How can a small absolute change still represent a large response?","back":"A small absolute change can be a large percentage of a small base.","mcqOptions":[{"text":"A small absolute change can be a large percentage of a small base.","correct":true,"explanation":"When the starting value is small, even a modest absolute change can represent a substantial proportion of it, producing a large percentage change."},{"text":"A small absolute change can be a small percentage of a small base.","correct":false,"explanation":"A small base magnifies the percentage effect of an absolute change. Therefore, a small absolute change can represent a large percentage, not necessarily a small one."},{"text":"A large absolute change can be a small percentage of a small base.","correct":false,"explanation":"A large change compared with a small base would represent a large percentage. A small base does not make the proportional response smaller."},{"text":"A small absolute change is always a large percentage of a large base.","correct":false,"explanation":"A large base generally makes a small absolute change an even smaller percentage. The large percentage response occurs when the base is small."}]},{"id":"1fbf76c1-5ad9-479e-8271-42a5bd3ae35b","cardType":"basic","points":1,"front":"Why can elasticity compare litres of petrol with tonnes of steel?","back":"Percentage changes allow fair comparison between goods measured in different units.","mcqOptions":[{"text":"Percentage changes allow fair comparison between goods measured in different units.","correct":true,"explanation":"Percentages remove the original measurement units, allowing changes in quantities such as litres and tonnes to be compared consistently."},{"text":"Absolute changes allow fair comparison between goods measured in different units.","correct":false,"explanation":"Absolute changes retain the original units, so litres and tonnes cannot be directly compared fairly. Percentage changes remove this measurement problem."},{"text":"Percentage changes allow fair comparison between goods measured in the same units.","correct":false,"explanation":"Elasticity is especially useful because percentage changes allow comparison even when goods use different units, such as litres of petrol and tonnes of steel."},{"text":"Prices allow fair comparison between goods measured in different units.","correct":false,"explanation":"Prices may be expressed in a common currency but do not by themselves measure responsiveness. Percentage changes allow elasticities to compare differently measured goods."}]},{"id":"e23f9453-6536-48ad-84c4-27a3f748ad95","cardType":"basic","points":1,"front":"What does a negative elasticity coefficient indicate?","back":"A negative coefficient shows that the two percentage changes move in opposite directions.","mcqOptions":[{"text":"A negative coefficient shows that the two percentage changes move in opposite directions.","correct":true,"explanation":"A negative elasticity means that an increase in one variable is associated with a decrease in the other, so their percentage changes move in opposite directions."},{"text":"A positive coefficient shows that the two percentage changes move in opposite directions.","correct":false,"explanation":"A positive coefficient indicates that the two percentage changes move in the same direction. Opposite movement is shown by a negative coefficient."},{"text":"A negative coefficient shows that the two percentage changes move in the same direction.","correct":false,"explanation":"Movement in the same direction produces a positive relationship. A negative coefficient indicates that one percentage change rises while the other falls."},{"text":"A zero coefficient shows that the two percentage changes move in opposite directions.","correct":false,"explanation":"A zero coefficient indicates no responsiveness or relationship in the measured change. Opposite directions are represented by a negative coefficient."}]},{"id":"7760001b-1f0b-46e3-a44c-20cacc2cbfef","cardType":"basic","points":2,"front":"Why is PED normally negative?","back":"PED is normally negative because a price rise reduces quantity demanded.","mcqOptions":[{"text":"PED is normally negative because a price rise reduces quantity demanded.","correct":true,"explanation":"The law of demand usually means that a price rise causes quantity demanded to fall. The opposing percentage changes give PED a negative sign."},{"text":"PED is normally negative because a price rise increases quantity demanded.","correct":false,"explanation":"A price rise normally reduces quantity demanded, rather than increasing it. Opposite movement between price and quantity demanded is what creates negative PED."},{"text":"PED is normally negative because a price fall reduces quantity demanded.","correct":false,"explanation":"Usually, a price fall increases quantity demanded. The normal inverse relationship is a price rise reducing quantity demanded, which makes PED negative."},{"text":"PED is normally negative because a price rise leaves quantity demanded unchanged.","correct":false,"explanation":"An unchanged quantity demanded would imply zero responsiveness, not a negative relationship. Negative PED results from quantity demanded moving oppositely to price."}]},{"id":"2bf19052-bff5-4029-a430-d2cbdce162df","cardType":"basic","points":1,"front":"What does a positive YED indicate about a good?","back":"A positive YED indicates a normal good.","mcqOptions":[{"text":"A positive YED indicates a normal good.","correct":true,"explanation":"For a normal good, higher income increases demand and lower income decreases demand. Income and quantity demanded therefore move in the same direction, giving positive YED."},{"text":"A negative YED indicates a normal good.","correct":false,"explanation":"A negative YED means demand falls as income rises, which defines an inferior good. Normal goods have positive YED because demand rises with income."},{"text":"A positive YED indicates an inferior good.","correct":false,"explanation":"Inferior goods have negative YED because demand decreases as income increases. Positive YED indicates that demand rises with income for a normal good."},{"text":"A zero YED indicates a normal good.","correct":false,"explanation":"Zero YED means demand does not respond to income changes. A normal good has positive YED because demand increases when income increases."}]},{"id":"2173af1e-9396-42a6-801e-c5d55cc03025","cardType":"basic","points":1,"front":"What does a negative YED indicate about a good?","back":"A negative YED indicates an inferior good.","mcqOptions":[{"text":"A negative YED indicates an inferior good.","correct":true,"explanation":"Demand for an inferior good falls when income rises and increases when income falls. Income and demand move oppositely, producing negative YED."},{"text":"A positive YED indicates an inferior good.","correct":false,"explanation":"Positive YED describes a normal good, whose demand rises with income. An inferior good has negative YED because demand falls as income rises."},{"text":"A negative YED indicates a normal good.","correct":false,"explanation":"Normal goods have positive YED because demand and income move in the same direction. Negative YED identifies an inferior good."},{"text":"A zero YED indicates an inferior good.","correct":false,"explanation":"Zero YED means income changes have no effect on demand. An inferior good requires a negative relationship between income and quantity demanded."}]},{"id":"8b9f4c9b-95e0-4062-acbd-eb93cd9a609f","cardType":"basic","points":1,"front":"What does a positive XED indicate?","back":"A positive XED indicates substitutes.","mcqOptions":[{"text":"A positive XED indicates substitutes.","correct":true,"explanation":"For substitutes, a price rise for one good increases demand for the other. Their percentage changes move together, giving positive XED."},{"text":"A negative XED indicates substitutes.","correct":false,"explanation":"Negative XED identifies complements because demand for one good falls when the other becomes more expensive. Substitutes have positive XED."},{"text":"A positive XED indicates complements.","correct":false,"explanation":"Complements have negative XED because a price rise in one reduces demand for the other. Positive XED indicates substitutes."},{"text":"A zero XED indicates substitutes.","correct":false,"explanation":"Zero XED suggests the goods have no measurable cross-price relationship. Substitutes respond in the same direction and therefore have positive XED."}]},{"id":"135d6e58-3df9-45b4-885a-6722521a9fd0","cardType":"basic","points":1,"front":"What does a negative XED indicate?","back":"A negative XED indicates complements.","mcqOptions":[{"text":"A negative XED indicates complements.","correct":true,"explanation":"For complementary goods, a price rise in one reduces demand for the other. The opposing changes give the cross-price elasticity a negative sign."},{"text":"A positive XED indicates complements.","correct":false,"explanation":"Positive XED indicates substitutes, where a price rise in one increases demand for the other. Complements have negative XED."},{"text":"A negative XED indicates substitutes.","correct":false,"explanation":"Substitutes have positive XED because demand for one rises when the other becomes more expensive. Negative XED identifies complements."},{"text":"A zero XED indicates complements.","correct":false,"explanation":"Zero XED indicates no cross-price response, rather than a complementary relationship. Complements have negative XED because their demands move oppositely."}]},{"id":"d202d261-79ac-46dd-a2bd-5cf8d536b793","cardType":"basic","points":3,"front":"What does an XED of +0.5 indicate?","back":"The goods are substitutes, and the relationship is weak.","mcqOptions":[{"text":"The goods are substitutes, and the relationship is weak.","correct":true,"explanation":"The positive sign shows the goods are substitutes, while the absolute value of 0.5 indicates a relatively weak cross-price response."},{"text":"The goods are complements, and the relationship is weak.","correct":false,"explanation":"The absolute value suggests a weak relationship, but the positive sign identifies substitutes. Complements have a negative XED."},{"text":"The goods are substitutes, and the relationship is strong.","correct":false,"explanation":"The positive sign correctly identifies substitutes, but an absolute XED of 0.5 represents a weak rather than strong relationship."},{"text":"The goods are complements, and the relationship is strong.","correct":false,"explanation":"Both parts are incorrect: the positive sign indicates substitutes, and the absolute value of 0.5 indicates a weak relationship."}]},{"id":"92a36931-029c-44b7-b750-e46511200a09","cardType":"basic","points":3,"front":"What does an XED of -0.8 indicate?","back":"The goods are complements, and the relationship is stronger than an XED of +0.5.","mcqOptions":[{"text":"The goods are complements, and the relationship is stronger than an XED of +0.5.","correct":true,"explanation":"The negative sign identifies complements. Its absolute value, 0.8, is greater than 0.5, so the relationship is stronger than an XED of +0.5."},{"text":"The goods are substitutes, and the relationship is stronger than an XED of +0.5.","correct":false,"explanation":"The absolute value comparison is correct, but the negative sign identifies complements, not substitutes. Substitutes have positive XED."},{"text":"The goods are complements, and the relationship is weaker than an XED of +0.5.","correct":false,"explanation":"The negative sign correctly identifies complements, but 0.8 has a greater absolute value than 0.5, so it represents a stronger relationship."},{"text":"The goods are substitutes, and the relationship is weaker than an XED of +0.5.","correct":false,"explanation":"The negative sign means complements, and the absolute value 0.8 exceeds 0.5. Therefore, both the relationship type and strength in this option are wrong."}]},{"id":"d11cbe14-2835-43ee-b02e-43ca1f85c749","cardType":"cloze","points":null,"front":"Elasticity uses [ ] so goods measured in different units can be compared fairly.","back":"Elasticity uses percentage changes so goods measured in different units can be compared fairly.","mcqOptions":[{"text":"percentage changes","correct":true,"explanation":"Elasticity uses percentage changes, which remove the original measurement units. This allows quantities such as litres of petrol and tonnes of steel to be compared fairly."},{"text":"absolute changes","correct":false,"explanation":"Absolute changes retain the original units, so litres and tonnes cannot be compared fairly. Elasticity uses percentage changes to make different measurements comparable."},{"text":"currency values","correct":false,"explanation":"Currency values do not remove differences in the units used to measure quantities. Elasticity relies on percentage changes to compare goods measured in different units."},{"text":"average values","correct":false,"explanation":"Average values do not necessarily account for the different units or base sizes involved. Percentage changes provide the unit-free comparison required by elasticity."}]},{"id":"0397202e-318e-4c8a-b226-0ccf6c36802a","cardType":"cloze","points":null,"front":"A coefficient with a size between 0 and 1 indicates an [ ] response.","back":"A coefficient with a size between 0 and 1 indicates an inelastic response.","mcqOptions":[{"text":"inelastic","correct":true,"explanation":"A coefficient between 0 and 1 means the percentage change in the response is smaller than the percentage change in the variable causing it, so the response is inelastic."},{"text":"elastic","correct":false,"explanation":"A coefficient above 1 indicates an elastic response, not a coefficient between 0 and 1. Here, the response changes by a smaller percentage than the original change."},{"text":"unit elastic","correct":false,"explanation":"Unit elasticity occurs when the coefficient is exactly 1, meaning equal percentage changes. A value between 0 and 1 instead shows an inelastic response."},{"text":"perfectly elastic","correct":false,"explanation":"Perfectly elastic describes a coefficient whose size approaches infinity. A coefficient between 0 and 1 shows a smaller-than-proportionate, or inelastic, response."}]},{"id":"a636b9fc-3077-471b-a3b3-48bbd02b6729","cardType":"cloze","points":null,"front":"A coefficient with a size of exactly 1 indicates a [ ] response.","back":"A coefficient with a size of exactly 1 indicates a unit elastic response.","mcqOptions":[{"text":"unit elastic","correct":true,"explanation":"A coefficient of exactly 1 means the percentage change in quantity is equal to the percentage change in the related variable, which is described as unit elastic."},{"text":"inelastic","correct":false,"explanation":"Inelastic responses have coefficients between 0 and 1, so the response changes less than proportionately. A coefficient of exactly 1 indicates unit elasticity instead."},{"text":"elastic","correct":false,"explanation":"Elastic responses have coefficients above 1, meaning the response changes more than proportionately. A coefficient of exactly 1 means the response changes in equal proportion."},{"text":"perfectly elastic","correct":false,"explanation":"Perfectly elastic describes a coefficient approaching infinity, not exactly 1. At exactly 1, the percentage changes are equal and the response is unit elastic."}]},{"id":"7c70dcec-ebc2-4b69-a58b-5a9fa554cbbe","cardType":"cloze","points":null,"front":"A coefficient with a size above 1 indicates an [ ] response.","back":"A coefficient with a size above 1 indicates an elastic response.","mcqOptions":[{"text":"elastic","correct":true,"explanation":"A coefficient above 1 means the percentage change in the response is larger than the percentage change in the related variable, so the response is elastic."},{"text":"inelastic","correct":false,"explanation":"Inelastic coefficients lie between 0 and 1 and represent less-than-proportionate responses. A coefficient above 1 instead indicates an elastic response."},{"text":"unit elastic","correct":false,"explanation":"Unit elasticity occurs at exactly 1, where percentage changes are equal. A coefficient above 1 means the response changes more than proportionately and is elastic."},{"text":"perfectly elastic","correct":false,"explanation":"Perfectly elastic refers to a coefficient whose size approaches infinity. A finite coefficient above 1 indicates an elastic, rather than perfectly elastic, response."}]},{"id":"6f42be68-811a-4bd2-b746-ce46b788736e","cardType":"cloze","points":null,"front":"A coefficient whose size approaches infinity indicates a [ ] response.","back":"A coefficient whose size approaches infinity indicates a perfectly elastic response.","mcqOptions":[{"text":"perfectly elastic","correct":true,"explanation":"When a coefficient's size approaches infinity, an extremely small change in the relevant variable produces a very large response, which is described as perfectly elastic."},{"text":"inelastic","correct":false,"explanation":"Inelastic responses have coefficients between 0 and 1 and change less than proportionately. A coefficient approaching infinity represents the opposite extreme: perfect elasticity."},{"text":"unit elastic","correct":false,"explanation":"Unit elasticity means the coefficient is exactly 1 and percentage changes are equal. A coefficient approaching infinity indicates a perfectly elastic response instead."},{"text":"elastic","correct":false,"explanation":"An elastic response has a coefficient above 1, but remains finite. As the coefficient's size approaches infinity, the more precise description is perfectly elastic."}]},{"id":"d2239bfc-b6c3-4287-a8de-8362fc4cb47f","cardType":"basic","points":2,"front":"What does an elasticity coefficient of 0 mean?","back":"There is no response; quantity demanded is perfectly unresponsive.","mcqOptions":[{"text":"There is no response; quantity demanded is perfectly unresponsive.","correct":true,"explanation":"A coefficient of 0 means quantity demanded does not change when the relevant variable changes, so demand is perfectly unresponsive and there is no response."},{"text":"There is a less-than-proportionate response; quantity demanded changes by less than the change.","correct":false,"explanation":"A less-than-proportionate response corresponds to a coefficient between 0 and 1. A coefficient of 0 means there is no response and quantity demanded is perfectly unresponsive."},{"text":"There is an exactly proportionate response; quantity demanded changes equally.","correct":false,"explanation":"An exactly proportionate response occurs when the coefficient is 1. A coefficient of 0 means quantity demanded is perfectly unresponsive, with no response."},{"text":"There is a more-than-proportionate response; quantity demanded changes substantially.","correct":false,"explanation":"A more-than-proportionate response requires a coefficient above 1. With a coefficient of 0, quantity demanded does not respond at all and is perfectly unresponsive."}]},{"id":"125661bb-e6e8-4034-8aee-eb816382fe71","cardType":"basic","points":2,"front":"What does an elasticity coefficient with a size of 0.5 mean?","back":"Quantity demanded responds less than proportionately to the change.","mcqOptions":[{"text":"Quantity demanded responds less than proportionately to the change.","correct":true,"explanation":"A coefficient with a size of 0.5 is between 0 and 1, so the percentage change in quantity demanded is smaller than the percentage change causing it."},{"text":"Quantity demanded responds in exact proportion to the change.","correct":false,"explanation":"Exact proportionality occurs when the coefficient is 1. A coefficient of 0.5 is between 0 and 1, so quantity demanded responds less than proportionately."},{"text":"Quantity demanded responds more than proportionately to the change.","correct":false,"explanation":"A more-than-proportionate response requires a coefficient above 1. Since 0.5 is below 1, quantity demanded responds less than proportionately."},{"text":"Quantity demanded shows no response to the change.","correct":false,"explanation":"No response corresponds to a coefficient of 0. A coefficient of 0.5 indicates that quantity demanded changes, but by less than proportionately."}]},{"id":"d679f933-e4bb-49f0-8303-9b00b7da0e79","cardType":"basic","points":2,"front":"What does an elasticity coefficient with a size of 1 mean?","back":"Quantity demanded responds in exact proportion to the change.","mcqOptions":[{"text":"Quantity demanded responds in exact proportion to the change.","correct":true,"explanation":"A coefficient of 1 means the percentage change in quantity demanded is exactly equal to the percentage change in the relevant variable, so the response is proportional."},{"text":"Quantity demanded responds less than proportionately to the change.","correct":false,"explanation":"A less-than-proportionate response occurs when the coefficient is between 0 and 1. A coefficient of 1 means quantity demanded responds in exact proportion."},{"text":"Quantity demanded responds more than proportionately to the change.","correct":false,"explanation":"A more-than-proportionate response occurs when the coefficient exceeds 1. At exactly 1, the percentage changes are equal rather than larger."},{"text":"Quantity demanded shows no response to the change.","correct":false,"explanation":"No response is represented by a coefficient of 0. A coefficient of 1 means quantity demanded changes by exactly the same percentage as the relevant variable."}]},{"id":"1f5a16ee-e979-4cc6-ba31-9ce82564388a","cardType":"basic","points":2,"front":"What does an elasticity coefficient with a size of 2 mean?","back":"Quantity demanded responds more than proportionately to the change.","mcqOptions":[{"text":"Quantity demanded responds more than proportionately to the change.","correct":true,"explanation":"A coefficient of 2 is above 1, meaning the percentage change in quantity demanded is twice the percentage change in the relevant variable and therefore more than proportionate."},{"text":"Quantity demanded responds less than proportionately to the change.","correct":false,"explanation":"A less-than-proportionate response has a coefficient between 0 and 1. A coefficient of 2 is above 1, so quantity demanded responds more than proportionately."},{"text":"Quantity demanded responds in exact proportion to the change.","correct":false,"explanation":"Exact proportionality occurs at a coefficient of 1. A coefficient of 2 means the percentage response is larger than the percentage change causing it."},{"text":"Quantity demanded shows no response to the change.","correct":false,"explanation":"No response corresponds to a coefficient of 0. A coefficient of 2 indicates a substantial response, with quantity demanded changing more than proportionately."}]},{"id":"1e7d329d-5677-4592-b483-620d8bdbe958","cardType":"basic","points":3,"front":"Why are both the sign and size needed to interpret an elasticity coefficient?","back":"The sign alone shows direction but not effect size; the size alone shows strength but not direction.","mcqOptions":[{"text":"The sign alone shows direction but not effect size; the size alone shows strength but not direction.","correct":true,"explanation":"The sign of an elasticity coefficient indicates whether the relationship is positive or negative, while its absolute size indicates how strongly one variable responds to changes in another."},{"text":"The sign alone shows strength but not direction; the size alone shows direction but not effect size.","correct":false,"explanation":"This reverses the roles of sign and size. The sign identifies the direction of the relationship, whereas the coefficient’s size measures the strength or responsiveness of that relationship."},{"text":"The sign alone shows effect size but not strength; the size alone shows direction but not effect size.","correct":false,"explanation":"Effect size and strength are both conveyed by the coefficient’s magnitude, not its sign. The sign is needed separately because it shows whether the relationship moves in the same or opposite direction."},{"text":"The sign alone shows direction and effect size; the size alone shows strength and direction.","correct":false,"explanation":"Neither part of the coefficient provides both types of information on its own. The sign gives direction, while the size gives strength, so both are required for a complete interpretation."}]}]}],"examCountdown":null,"heading":"2.2.3 significance of relative percentage changes, the size and sign of the coefficient","title":"2.2.3 significance of relative percentage changes, the size and sign of the coefficient Flashcards","topbar":{"backHref":"/international-a-level/economics/cie/flashcards"},"topicSidebar":"$L39"}]}],"topicId":"a9a20a03-3bb4-46c7-8aaa-891a66cce719","walled":"$L3a"}],"$L3b","$L3c"]