1. The price elasticity of demand measures: a. the change in quantity demanded o

Question

1. The price elasticity of demand measures: a. the change in quantity demanded of a good given a change in income. b. the change in quantity demanded of a good given a change in the price of another good. c. the change in the quantity demanded of a good given a change in the price of the good. d. the change in the quantity demanded of a good given a change in the price elasticity of supply.                 2. If a good has price-inelastic demand, a. a 1 percent increase in price produces less than a 1 percent decrease in the quantity demanded. b. a 1 percent increase in price produces less than a 1 percent increase in the quantity demanded. c. a 1 percent increase in price produces more than a 1 percent increase in the quantity demanded. d. a 1 percent increase in price produces more than a 1 percent decrease in the quantity demanded. 3. When the price is 5, the quantity demanded is 10. When the price is 7, the quantity demanded is 5. What is the price elasticity of demand?            a. 1                      b. 0.5                           c. 0.33                                                d. 2                 4. A perfectly inelastic demand curve will be ______ on a graph while a perfectly elastic demand curve will be ------------------- on a graph. a. vertical; horizontal             b. horizontal; vertical           c. vertical; vertical                       d. horizontal; horizontal                 5. P x Q =                    a. MC                          b. TR                          c. MR                                       d. TC                 6. When demand is price-inelastic, a price decrease will result in: a. an increase in total cost.   b. an increase in total revenue.       c. a decrease in total cost.      d. a decrease in total revenue.                 7. The practice of charging different prices to different buyers is called: a. total revenue.             b. price discrimination.                 c. price elasticity.                 d. an increase in demand. 8. A percentage change in quantity supplied divided by a percentage change in price is called: a. income elasticity.              b. price elasticity of demand.            c. price elasticity of supply.        d. elasticity of substitution. 9. When the price is 5, the quantity supplied is 10. When the price is 10, the quantity supplied is 20. What is the price elasticity of supply?          a. 1                     b. 0.5                                c. 0.33                                        d. 2                 10. When governments restrict agricultural production, the supply curve to shifts to the --------------------, the equilibrium price ---------------, and the result is --------------------------------- revenue for farmers. a. right; decreases; higher        b. left; decreases; higher             c. left; increases; lower               d. left; increases; higher                 11. The burden of a gasoline tax will be borne mostly by _______ because the demand curve is relatively _______. a. producers; inelastic          b. producers; elastic              c. consumers; inelastic                 d. consumers; elastic 12. To show the imposition of a tax on a supply and demand graph, shift the supply curve --------------. To show the imposition of a subsidy on a supply and demand graph, shift the supply curve -----------------------------------. a. upward; upward              b. downward; upward                   c. upward; downward                       d. downward; upward                 13. If demand is inelastic relative to supply, most of the burden of a tax will be borne by ------------------------. a. consumers                    b. producers                      c. firms                                   d. none of the above 14. When the minimum wage is raised, we would expect that unemployment ______, but if demand for labor is relatively inelastic, revenues of low-wage workers will ______ after the minimum wage increase. a. increases; increase             b. increases; decrease                      c. decreases; increase                    d. decreases; decrease                 15. Price ceilings generally lead to: a. unemployment.                  b. shortages.                        c. surpluses.                         d. none of the above.

Explanation / Answer

1.  c. the change in the quantity demanded of a good given a change in the price of the good.

The elasticity of demand measures responsiveness to change in quantity demanded due to change in the price of commodity.

2. a. a 1 percent increase in price produces less than a 1 percent decrease in the quantity demanded.

Ed is inelastic when Ed < 1 i.e. percentage change in quantity demanded is less than the percentage change in price of commodity.

3. Ed = (P1 + P2)/(Q1 + Q2) x (Q2 - Q1)/(P2 - P1) = (5 + 7) / (10 + 5) x (- 5) / (2) = 12/15 x - 2.5 = - 2

Answer is d) 2

Negative sign only shows inverse relationship betwen price and quantity demanded.

4. a) vertical; horizontal

Perfectly inelastic demand means change in price does not affect quantity demanded. So, demand curve is vertical in this case. Perfectly elastic demand means a slight increase in price reduces quantity demanded to zero. Demand curve is horizontal in this case.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.