Econ Test 2

If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?

Quantity Demanded will remain the same. if quantity demanded is perfectly inelastic, the price elasticity of demand is zero. So any change in price, large or small, would not affect the quantity demanded.

Which of the following is false? all answers are true the price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. if demand is inelastic, it means the quantity demanded changes by a relatively smaller amount than the price change. The price elasticity of demand measures the responsiveness of quantity demanded to a change in price If demand is elastic, it means the quantity demanded change by a relatively larger amount than the price change.

all of the answers are true.

a 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded. It appears:

demand is elastic and total revenue will increase. price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

A price cut will increase the total revenue a firm received if the demand for its product is:

elastic a price cut will increase the total revenue a firm receives if the demand for its product is elastic. if the demand is elastic, the percentage increase in quantity demanded is greater than the percentage reduction in price, thus total revenue increases.

Which of the following would most likely feature elastic demand? heart surgery a required textbook fresh green beans all of the above none of the above

fresh green beans in general, the more substitutes for a specific good, the more elastic its demand tends to be.

a perfectly elastic supply curve is

horizontal. (P0 - producers will supply any quantity at that price.) elasticity will be equal to infinity.

If the elasticity of demand for bangles is equal to 1, an increase in price will:

not affect the quantity purchased. if the elasticity of demand is equal to 1, the percentage decrease in quantity equals the percentage increase in price.

The elasticity of supply is defined as the ______ change in the quantity supplied divided by the ______ change in price.

percentage; percentage the price elasticity is a measure of the responsiveness of the quantity supplied divided by the percentage change in price and it is unit less.

If demand is inelastic

price and total revenue have a direct relationship (move in the same direction)

If demand is elastic

price and total revenue have inverse relationship (move in opposite direction)

Price elasticity of demand is defined as:

the percentage change in quantity demand divided by the percentage change in price.