Elasticity

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true? Correct Response A) It is elastic at high prices and inelastic at low prices. B) It is perfectly elastic at very high prices and perfectly inelastic at very low prices. C) It is inelastic at high prices and elastic at low prices. D) It is unit elastic throughout the demand curve.

A) It is elastic at high prices and inelastic at low prices.

Which of the following items is likely to have the highest income elasticity of demand? Correct Response A) a vacation home in the Swiss Alps B) a bus ride C) a tank of gasoline D) a meal at Taco Bell

A) a vacation home in the Swiss Alps

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is A) a luxury good. B) a necessity. C) an income elastic good. Correct Response D) an inferior good.

D) an inferior good.

If the demand for cell phone service is inelastic, then A) the quantity demanded does not change in response to changes in price. Correct Response B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value). C) the percentage change in quantity demanded is equal to the percentage change in price. D) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).

B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value).

Suppose the value of the price elasticity of supply is 4. What does this mean? A) For every $1 increase in price, quantity supplied increases by 4 units. B) A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. Correct Response C) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. D) A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent.

C) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.

Which of the following statements about price elasticity of demand is false? A) A linear downward-sloping demand curve has a varying price elasticity coefficient. B) If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic. C) The value of the price elasticity of demand along a downward-sloping demand curve is always negative. Correct Response D) The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope.

D) The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope.

If the demand for a steak is unit elastic, then A) the percentage change in quantity demanded is 1 percent greater than the percentage change in price. B) quantity demanded does not respond to changes in price. C) the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). Correct Response D) the percentage change in quantity demanded is equal to the percentage change in price.

D) the percentage change in quantity demanded is equal to the percentage change in price.