9. Which of the following would result in a lower absolute value of the price el

Question

9. Which of the following would result in a lower absolute value of the price elasticity of demand for a product? a. wide variety of substitutes available for the good b. long time period considered c. the expenditure on the good small relative to one's budget d. the good is a luxury item 10. Which of the following statements regarding the price elasticity of demand is NOT a. A demand for a good is considered unitary elastic if the price elasticity in absolute value is correct: equal to one. Based on the law of demand the price elasticity of demand can be either positive or negative. It measures the change in quantity demanded when there is a change in the price of the product. If the demand for a good is elastic, increase in the price of the good will lead to a decrease in the total revenue. b. c. d. 11. If the price elasticity of supply for Minute Maid lemonade is 2.0, what will happen to the quantity of Minute Maid lemonade that is supplied if the price increases by 20%? a. The quantity supplied will increase by 40%. b. The quantity supplied will increase by 10%. c. The quantity supplied will increase by 0.1%. d. The quantity supplied will decrease by 10%. 12. In order to prove that video games and a game console are complements in and get a consumption, one should measure the a. price elasticity of demand; number greater than 1 (in absolute value) b. price elasticity of demand; number less than 1 (in absolute value) c. cross-price elasticity; positive number d. cross-price elasticity; negative number

Explanation / Answer

First question is answered below

Correct option: (c)

Reason: In case of large availability of substitutes, elasticity of demand of the good is very high. Similarly, larger the time horizon, larger the elasticity of demand. Also, luxury items have high elasticity of demand as they are very expensive and affordable only at high income level. Coming to goods with small proportion in total budget, these goods are not very expensive and do not hold much effect on total budget. Minor changes in price of these goods will not affect its demand much, making demand inelastic.

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