Demand and Supply Elasticity
3. Price elasticity of demand deals with absolute, not relative, values.
F
If the cross price elasticity between Goods A and B is −10, then A and B are
strongly complementary.
If the cross price elasticity of demand between Goods A and B is positive, the goods are
substitutes
If the demand for Good A is perfectly elastic,
the demand curve is positively sloped.
If the demand for Good A is perfectly inelastic at all prices,
. c. the demand curve is vertical at the given quantity.
A fall in the price of lemons from $10.50 to $9.50 per bushel increases the quantity demanded from 19,200 to 20,800 bushels. The price elasticity of demand is
0.80
A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is
1.20
The table above gives the demand schedule for snow peas. The price elasticity of demand between $6.00 and $7.00 per bushel is
2.6
If the demand for Good A is perfectly inelastic at all prices,
All of the above
If price falls and total revenues rise, then over that price range demand is inelastic.
F
If supply is perfectly inelastic, the curve will be horizontal at the given quantity.
F
If the demand for Good A is perfectly elastic, its demand curve is vertical at that price.
F
If the price elasticity of demand is 3, then over the relevant price range demand is inelastic.
F
Price elasticity of demand measures the responsiveness of price to changes in quantity demanded.
F
The less time people have to respond to a price change, the higher is the price elasticity.
F
The price elasticity of demand for Microsoft software is less than the price elasticity of demand for software.
F
Which one of the following is not true concerning the price elasticity of demand?
It equals the percentage change in price divided by the percentage change in quantity demanded
2. Because of the law of demand, price elasticity of demand will always (implicitly) be a negative number.
T
If the cross price elasticity of demand for Goods A and B is negative, A and B are complements.
T
If the demand for Good A is perfectly inelastic over all prices, Good A violates the law of demand.
T
If the price elasticity of demand is 0.5 at the current price of an item, an increase in the price of the item will increase revenues.
T
Income elasticity of demand is calculated for a horizontal shift in the demand curve, given price.
T
When price elasticity of demand is calculated by using the average value approach, price elasticity is the same whether price rises or falls over a given demand curve range.
T
When the demand for an item is perfectly elastic, the slightest increase in the price of that item causes the quantity demanded to drop to zero. As a result, the demand curve for the item is horizontal.
T
If the demand for Good A is perfectly inelastic at all prices,
a. quantity demanded does not change as price changes.
If the demand for Good A is perfectly inelastic at all prices,
b. the law of demand is violated.
Digitals and downloadable apps are
complements
If quantity demanded to changes in price. quantity demanded to changes in income. price to changes in quantity demanded. price to changes in demand. the price elasticity of demand is 0.33, then
demand is inelastic over that price range.
If price elasticity of demand is calculated using the original price and quantity, then over a given range in the demand curve price elasticity of demand
differs, depending on whether price rises or falls.
If the supply of Good B is perfectly elastic and price falls, quantity supplied will
fall to zero
If price falls and over that price range demand is inelastic, total revenues will
fall.
When the income elasticity of demand for Good A is calculated,
income changes, which lead to horizontal shifts in the demand curve for Good A, are measured
A movement along a demand curve is to price elasticity of demand as a shift in the demand curve is to
income elasticity of demand.
A perfectly inelastic supply curve
indicates zero quantity supplied responsiveness to price changes.
At current prices of a highly addictive drug, the demand for the drug is highly price
inelastic
If price rises and total revenue rises, then the price elasticity of demand over that range is
inelastic
If price falls by 1 percent and quantity demanded rises by 2 percent, then the price elasticity of demand
is elastic over that range.
If price rises, the quantity supplied will be greater the
longer the time that elapses
Which one of the following is not a determinant of the price elasticity of demand?
price elasticity of supply
Which of the following goods is probably the most highly income elastic?
private education
Price elasticity of demand measures responsiveness of
quantity demanded to changes in price.
