Chapter 6

Refer to the diagram. In the P1P2 price range, demand is:

relatively elastic.

Refer to the diagram. In the P3P4 price range, demand is:

relatively inelastic.

The demand for a luxury good whose purchase would exhaust a big portion of one's income is:

relatively price elastic.

The demand for a necessity whose cost is a small portion of one's total income is:

relatively price inelastic.

The price elasticity of supply measures how:

responsive the quantity supplied of X is to changes in the price of X.

Which of the following goods will least likely suffer a decline in demand during a recession?

Toothpaste

The price elasticity of demand coefficient measures:

buyer responsiveness to price changes.

The basic formula for the price elasticity of demand coefficient is:

percentage change in quantity demanded/percentage change in price.

The formula for cross elasticity of demand is percentage change in:

quantity demanded of X/percentage change in price of Y.

The more time consumers have to adjust to a change in price,

the greater will be the price elasticity of demand.