Elasticities

Price elasticity of demand (PED) is a measure of the responsiveness of the quantity of a good demanded to changes in its price. PED is calculated along a given demand curve. In general, if there is a ________ responsiveness of quantity demanded, demand is referred to as being price ________; if there is a _______ responsiveness, demand is price _________.

• small; elastic; large; inelastic

• large; inelastic; small; elastic

• large; elastic; small; inelastic

• small, insensitive, large; sensitive

When 0 < PED < 1, price demand is _________

• Perfectly elastic

• Perfectly inelastic

• Inelastic

• Elastic

• Unitary elastic

When 1 < PED < ∞, price demand is _________

• Perfectly elastic

• Perfectly inelastic

• Inelastic

• Elastic

• Unitary elastic

When PED = 1, price demand is _________

• Perfectly elastic

• Perfectly inelastic

• Inelastic

• Elastic

• Unitary elastic

When PED = ∞, price demand is __________

• Perfectly elastic

• Perfectly inelastic

• Inelastic

• Elastic

• Unitary elastic

Which demand curve is more elastic?

• The top one

• The bottom one

• Impossible to say

When demand is ___________, an increase in price causes _________ in total revenue, while a decrease in price causes _______ in total revenue.

• inelastic; a fall; a rise

• elastic; a rise; a fall

• elastic; a fall; a rise

• None of the above

Cross-price elasticity of demand for two goods is ________ (XED > 0) when the demand for one good and the price of the other good change in _______direction: when the price of one ____________, the demand for the other __________.

• negative; the same; decreases; increases

• positive; opposite; increases; decreases

• positive; the same; increases; increases

• negative; positive; decreases; decreases

Two goods with a XED of +0.7 are ______________ for each other than two goods with a XED of +0.3.

• weaker substitutes

• stronger substitutes

• weaker complements

• stronger complements

Income elasticity of demand is positive when demand and income change in the same direction. A positive YED indicates that the good in question is __________.

• an inferior good

• a normal good

• a luxury good