Elasticity

How do economists avoid confusion over units in the computation of elasticity?

By using percentage changers rather than simple differences.

As the price of the good increases, its price elasticity of demand, in absolute value,

Increases

If we find that the price elasticity of demand for hamburgers is -1.3 while the price elasticity of demand for textbooks is -0.6, which of the following can we say is true?

The demand for hamburgers is more elastic than the demand for textbooks.

If you know the value for price elasticity of demand, then which of the following can you compete?

The effect of a price change on the quantity demanded.

What happens when the quantity demanded is very responsive to changes in price?

The percentage change in quantity demanded will be greater than than the percentage change in price.

Which of the following statements about the slope and the price elasticity of demand is correct?

The slope is calculated using changes in quantity and price, whereas elasticity is calculated using percentage changes.

Which of the following is true about the value of the price elasticity of demand?

The value is always negative.

Price elasticity demand is

a measure of responsiveness of the change in the quantity demanded of a good to the change in its price.

Which of the following is true if quantity demanded is not very responsive to price?

a. The percentage change in quantity demanded will be less than than the percentage change in price. b. the price elasticity of demand will be less than 1 in absolute value. c. Demand is inelastic d. ALL OF THE ABOVE

Fill in the blank. If a 20 percent increase in the price of Red Bull energy drink results in a decrease in the quantity demanded of 25 percent, we say the demand for Red Bull is____ in this range

b. elastic

Who benefits from the concept of elasticity?

both business managers and policymakers.

How is the price elasticity of demand is measured?

by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price.

If a 20 percent increase in the price of Red Bull energy drink results in a decrease in the quantity demanded of 25 percent, the price elasticity of demand is?

c. -1.25

Fill in the blanks. Along a linear demand curve, the slope_____ while the price elasticity of demand _______

is constant: changes from one point to another.

If a 10 percent increase in the price of one good leads to a 10 percent reduction in the quantity demanded , then the demand for that good is?

unit elastic