2.5 Elasticity of Demand

Multiple Choice

True or false: price elasticity of demand is always a negative number.

• True

• False

Multiple Choice

In the formula for PED, the numerator is the...

• Difference in Qd

• Difference in P

• % change in Qd

• % change in P

Multiple Select

In the following situation, we know that... (check all that apply)

• Demand is inelastic

• Demand is elastic

• PED > 1

• PED < 1

Multiple Select

A perfectly inelastic demand means that... (check all that apply)

• PED = 0

• PED = infinity

• Quantity demanded stays the same when price increases

• Quantity demanded drops to 0 when price increases

Fill in the Blanks

Price ... demand means that a change in price leads to a proportionally greater change in quantity demanded.

Multiple Select

Watches will likely have a higher price elasticity of demand than rice because... (check all that apply)

• Watches are more necessary in our daily lives.

• Watches take up a smaller proportion of income than rice

• There are more substitutes for watches than for rice

• Rice takes up a smaller proportion of income than watches

Multiple Choice

The price of Good X increases from $9 to $10. The quantity demanded remains the same at 8 units. The PED in this case is...

• Unitary elastic

• Price elastic

• Perfectly elastic

• Perfectly inelastic