Elasticity of Demand & Supply

Assume a pizza costs $10. When the price increases to $12, demand falls 10%. What is the own-price elasticity of demand? Note: in economics, elasticity is generally reported as a positive number even when it is negative.

• 5

• .5

• 2

• .2

The price elasticity of demand measures the responsiveness of _____________.

• the quantity demanded of a good to a change in its price

• the price of a good to a change in a consumer's income

• the price of a good to a change in the quantity demanded

• the quantity demanded of a good to a change in a consumer's income

If the price elasticity of demand for a product is 2.5 and its price has increased by 3%, we can conclude that the quantity demanded:

• Increased by 7.5%

• Decreased by 3%

• Decreased by 7.5%

• Increased by 2.5%

For which type of good would you expect the price elasticity of demand to be highest?

• Giffen goods

• Normal goods

• Luxury goods

• Inferior goods

Imagine a good with a small, positive income elasticity of demand. What type of good is it?

• Inferior, necessary good

• Inferior, luxury good

• Normal, necessary good

• Normal, luxury good

A good that is perfectly elastic will have a ___________.

• steep demand curve

• vertical supply curve

• horizontal supply curve

• shallow supply curve

In the short term, would you expect a non-durable good's price elasticity of demand to be higher or lower than it is in the long term?

• Higher, because there may be psychological impediments to reacting to a change in the short term

• Lower, because non-durable goods are more necessary in the long-term than they are in the short-term

• Higher, because non-durable goods are more necessary in the short-term than in the long-term

• Lower, because consumers are more likely to switch to other substitutes over the long term

Electricity is a good with few or no close substitutes. What would you expect about the price elasticity of demand for electricity?

• Perfectly elastic

• Relatively elastic

• Relatively inelastic

• Perfectly inelastic

A good for which demand increases more quickly than income is a _______________.

• luxury good

• inferior good

• normal good

• Giffen good

If the price elasticity of demand for a good is relatively elastic, then ___________.

• a change in the price causes a small change in quantity demanded

• a change in the price causes a large change in quantity demanded

• a change in the price causes no change in quantity demanded

• a change in quantity demanded causes a large change in the price