IB Econ 20 - Elasticity

The price elasticity of demand measures how much

• quantity demanded responds to a change in price.
• quantity demanded responds to a change in income.
• price responds to a change in demand.
• demand responds to a change in supply.

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

• 0
• 1
• 6
• 36

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• There are many substitutes for this good.
• The good is a necessity.
• The market for the good is narrowly defined.
  
• The relevant time horizon is long.

A key determinant of the price elasticity of supply is

• the ability of sellers to change the price of the good they produce.
• the ability of sellers to change the amount of the good they produce.
• how responsive buyers are to changes in sellers' prices.
• the slope of the demand curve.

If the price elasticity of supply is 0.2, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

• 0.07%.
• 0.60%
• 6%
• 15%

Income elasticity of demand measures how

• the quantity demanded changes as consumer income changes.
• consumer purchasing power is affected by a change in the price of a good.
• the price of a good is affected when there is a change in consumer income.
• many units of a good a consumer can buy given a certain income level.

The quantity of peanuts supplied increased from 40 tons/week to 60 tons/week when the price of peanuts increased from $4/ton to $5/ton. The price elasticity of supply for peanuts over this price range is:

• Elastic
• Inelastic
• Unit Elastic
• Perfectly Inelastic

A city's transit authority increases the price of subway and bus tickets from $1.25 to $1.50. If the demand for these tickets is price inelastic, 1) the # of people riding buses & subways AND 2) the city's revenues will change in which way (respectively)?

• 1) Increase; 2)Increase
• 1) Decrease; 2) Increase
• 1) Decrease; 2) Decrease
• 1) No Change; 2) Increase

If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of a good, demand is:

• Relatively inelastic
• Relatively elastic
• Perfectly elastic
• Perfectly inelastic

For an inferior good, an increase in consumer income will cause:

• The demand curve to shift left
• The demand curve to shift right
• The supply curve to shift left
• The supply curve to shift right