Elasticity

1. Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in

a. Interest rates

b. Price

c. Supply

d. Demand

2. If the elasticity coefficient is 7, this means that

e. The percentage change in quantity demanded is 7 times the percentage change in price.

f. If quantity demanded fell by 1 percent, price would fall by 7 percent.

g. If price was raised 7 percent, quantity demanded would fall by 7 percent.

h. If price was raised 7 percent, quantity demanded would rise 7 percent.

i. None of the above

3. Price falls from $1.20 to $1.00, and the quantity demanded rises from 90 units to 120 units. What is the coefficient of price elasticity of demand between the two prices?

j. 1.57

k. 0.75

l. 0,64

m. 1.00

n. 1.93

4. If the percentage change in quantity demanded is equal to the percentage change in price, demand is

o. Inelastic

p. Unit elastic

q. Elastic

r. Perfectly elastic

s. Perfectly inelastic

5. Which of the following would result in higher price elasticity?

t. More substitutes for a good

u. Shorter period of time considered

v. Lower costs of labor

w. The good is more of a necessity

6. Vernon spends the following percentages of his budget on the following goods: 23 percent on good A, 11 percent on good B, 1 percent on good C, and 3 percent on good D. For which good is price elasticity of demand the highest, ceteris paribus?

x. Good A

y. Good B

z. Good C

{. Good D

7. If for good Z income elasticity is less than 1 but greater than zero, then demand for good Z is income __________, and good Z is a(n) __________ good.

|. Inelastic; normal

}. Inelastic; inferior

~. Elastic; normal

. Elastic; inferior

. Unit elastic; normal

8. Suppose a producer decides that if the price of his or her...