Principles of Economics (2)

Unit elastic is, if

• e (y) = 1

• e (y) > 1

• e (y) < 1

• e (y) = 0

Inelastic demand is, if

• e (y) = 1

• e (y) > 1

• e (y) = ∞

• e (y) < 1

Elastic demand is if

• e (y) > 1

• e (y) = ∞

• e (y) < 1

• e (y) = 0

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