Elasticity of Demand

Water has seen an increase in demand 8% this summer, while the price has decreased 12%

• 1.5 inelastic

• 1.5 elastic

• .67 inelastic

• .67 elastic

Wheat has seen a decrease in demand of 5%, while the price has increased 7%

• 1.4 inelastic

• 1.4 elastic

• .71 inelastic

• .71 elastic

Oil has seen a decrease in demand of 9%, while the price has increased 13%

• 1.44 inelastic

• 1.44 elastic

• .69 inelastic

• .69 elastic

Prada has seen a increase in demand of 70%, while the price has decreased 35%

• .5 inelastic

• .5 elastic

• 2 inelastic

• 2 elastic

Red Wing Shoes has seen a decrease in demand of 40%, while the price has increased 20%

• .5 inelastic

• .5 elastic

• 2 inelastic

• 2 elastic

Demand is almost always more elastic at higher prices and less elastic at lower prices.

• True
• False

The formula for calculating elasticity of demand is:

• The % change in price over the % change in quantity demanded
• The % change in quantity demanded over the % change in price
• The change in price over the change in quantity demaned
• The change in quantity demanded over the change in price

If the price on a product goes up the quantity demanded will go down. This follows the economic theory of:

• Law of Demand
• elasticity
• income effect
• None of the above

Suppose that elasticity of demand of socks is 0.7.  If the price of socks is reduced by 10%, how will sales be effected?

• sales will grow by more than 10%
• Sales will grow by 10%
• Sales will grow by less than 10%
• Sales will decrease by 10%

which of the following is not a determinant of demand elasticity?

• availability of substitutes
• share of consumer's budget spend on good
• duration of adjustment period
• government spending