Principles of Economics (3)

The demand for a good will be more price elastic,

• The smaller is the percentage of income spent on it

• The higher is its price

• The smaller the supply of the good

• The more substitutes are available for the good.

A price elasticity of demand of -2 means that a 10% increase in price will result in a :

• 20% increase in the quantity demanded.

• 20% decrease in the quantity demanded.

• 5% decrease in the quantity demanded.

• 2% decrease in the quantity demanded.

The price of plums falls by 7% and the quantity of plums demanded increases by 6.75%. We conclude that the demand for plums is:

• Inelastic

• Elastic

• Perfectly elastic

• Perfectly inelastic

When the price of a good increased by 5 per cent, the quantity of it demanded decreased by 10 per cent. The price elasticity of demand is ___, and the rise of price will ________ total revenue.

• -2.0, increase

• -2.0, decrease

• -0.5, decrease

• -0.5, increase

If the demand for a good is unit elastic, then a 5 per cent increase in price results in:

• A 5 per cent increase in total revenue
• An increase in total revenue of less than 5 per cent
• No change in total revenue
• A 5 per cent decrease in total revenue

If a 4 per cent decrease in income (at a constant price) results in a 2 per cent decrease in the consumption of turnips, then:

• Turnips are a necessity and a normal good

• Turnips are a luxury and a normal good

• The income elasticity of turnips is negative

• Turnips are an inferior good

Preferences for Brussels sprouts increase. The price of Brussels sprouts will not change if the price elasticity of:

• Supply is zero

• Supply is 1

• Supply is infinity

• Demand is 1

If a 12 per cent rise in the price of orange juice decreases the quantity of orange juice demanded by 22 per cent, price elasticity of demand for orange juice is:

• -1.83

• -10%

• 1.83

• 10%

If a 12 per cent rise in the price of orange juice increases the quantity of apple juice demanded by 14 per cent, cross elasticity of demand for apple juice with respect to the price of orange juice is:

• 1.17

• 2%

• -2%

• -1.17