Managerial Economics

A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its

price. The price elasticity of demand for pizza is

• 2

• 10

• 0.5

• 20

If the price elasticity is between 0 and 1, demand is

• inelastic.

• elastic.

• perfectly elastic.

• unit elastic.

A good with a vertical demand curve has a demand with

• infinite elasticity.

• unit elasticity.

• zero elasticity.

• varying elasticity.

The more substitutes available for a product,

• the larger is its income elasticity of demand.

• the smaller is its income elasticity of demand.

• the smaller is its price elasticity of demand.

• the larger is its the price elasticity of demand.

The figure shows a good

• that is an inferior good over all income ranges.

• whose income elasticity is greater than 0 but less than 1.

• that is a normal good over some income ranges and an inferior good over other ranges.

• whose income elasticity always exceeds 1.0.

If goods A and B are complements,

• the cross elasticity of demand between A and B is negative.

• the cross elasticity of demand between A and B is positive.

• their income elasticities of demand are both less than 1.

• their income elasticities of demand are both greater than 1.

To say that turnips are inferior goods means that the income elasticity

• is definitely greater than 1.

• is negative.

• is positive but could be greater than or less then (or equal to) 1.

• is definitely between 0 and 1.