Chapter 6

The basic formula for the price elasticity of demand coefficient is

Percentage change in quantity demanded/Percentage change in price

A demand curve that is parallel to the horizontal axis is:

Perfectly elastic

We would expect the cross elasticity of demand between Pepsi and Coke to be:

Positive, indicating substitute goods

In which of the following instances will total revenue decline?

Price rises and demand is elastic

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

Quantity demanded of X/ Percentage change in price of Y

If the income elasticity of demand for lard is -3.00, this means that:

lard is an inferior good

The main determinant of elasticity of supply is the:

Amount of time the producer has to adjust inputs in response to a price change

The price elasticity of demand coefficient measures:

Buyers responsiveness to price changes

The total revenue test for elasticity:

Does not apply to supply because price and total revenue always move together

The price elasticity of demand of a straight-line demand curve is

Elastic in high-price ranges and inelastic in low-price ranges

A perfectly inelastic curve:

Graph as a line parallel to the vertical axis

Which of the following is not characteristic of the demand for a commodity that is elastic?

The elasticity coefficient is less than one

The elasticity of demand for a product is likely to be greater:

The greater amount of time over which buyers adjust to a price change

Which of the following generalizations is not correct?

The price elasticity of demand is greater for necessities than it is for luxuries.

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded:

decreased by 7 percent

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will

increase the quantity demanded by about 25 percent