ECS1500 ASSIGNMENT 2 SOLUTIONS SEMESTER 2 2020

ECS1500
ECS1500 ASSIGNMENT 2 SOLUTIONS SEMESTER
2 2020



ECS1500
ASSIGNMENT 2
SOLUTIONS
SEMESTER 2 2020

, Assignment 02



UNIQUE NUMBER : 742423




2.1 When calculating price elasticity of demand the answer will always be negative, because the demand
curve has a downward slope.


[1] True
[2] False



Explanation: Price elasticities of demand are always negative since price and quantity demanded always
move in opposite directions (on the demand curve). By convention, we always talk about elasticities as
positive numbers. Mathematically, we take the absolute value of the result



2.2 When demand is elastic, it means that the quantity demanded will not be sensitive to a change in the
price level.


[1] True

[2] False



Explanation: The price elasticity of demand measures the sensitivity of the quantity demanded to changes
in the price. Demand is inelastic if it does not respond much to price changes, and elastic if demand
changes a lot when the price changes.



2.3 The change in GDP is the best measure of the change in economic activity in a country.


2