ECON 2302: TEST 1 PART 3

Elasticity is

a measure of how much buyers and sellers respond to changes in market conditions

If the price elasticity of demand for a good is 6, then 3 decrease in price results in

an 18 percent increase in the quantity demanded

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

The availability of close substitutes in determining the price elasticity of demand

The price elasticity of demand measures

buyers responsiveness to a change in the price of a good

Ryan says that he would buy one cup of coffee every day regardless of the price. If he is telling the truth, Ryan

demand for coffee is perfectly inelastic

An increase in price causes an increases in total revenue when demand is

inelastic

If a 15% increase in price for a good results in 20% decrease in quantity demanded, the price elasticity of demand is

1.33

The case of perfectly elastic demand is illustrated by a demand curve that is

horizontal

In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

immediately after the price increase

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest

one year after the price increase

Economists compute the price elasticity of demand as the

percentage change in quantity demanded divided by the percentage change in rice

A perfectly inelastic demand implies that buyers

purchase the same amount as before when the price rises or falls

The following are NOT determinant of the price elasticity of demand for a good

the steepness or flatness of the supply curve for the good