Business Notes About Elasticity

Worksheet #2

*NB Place a circle around the correct answer, (a) or (b)

1) Qd = f (P1, P2…….Pn, Y, ? , E) (a) U (b) T

2) Ped = + ; does this mean that if P↑, then Qd (a)↓ or (b)↑?

3) Yed = - ; is the good (a) normal (b) inferior good ?

4) Ced = + : is it (a) substitute (b) complementary good ?

5) Ped = - 0.56 ; which of the following diagrams is correct?

(a) (b)

6) Yed = + 3.2; which of the following diagrams is correct?

(a) (b)

7) There are two goods, tea and coffee. Which Ced describes the relationship between the two goods more accurately?

(a) Ced = + 2.3 (b) Ced = - 2.3

8) What would cause the supply curve to shift upwards and to the left?

____________________________________________________

9) What would cause the demand curve to shift outwards and to the right?

_____________________________________________________

(10) Ped = - 0.76; in order to maximize Total Revenue (TR = P x Q) should a

producer (a)↑ or (b) ↓ price ?

(11) Calculate the income elasticity of demand for the following, and state

if the good is an inferior or normal good.

Y Q

€40 600

€50 700

12) Calculate the price elasticity of supply for the following, and draw the

corresponding supply curve.

Price Quantity

€12 70

€18 90

Price Elasticity of demand

Price...