Price Elasticity of Demand

Gas prices rose by 12% following a hurricane in the Gulf of Mexico. As a result, the amount of gas purchased in the week fell by 3% following the price increase.

What is the price elasticity of demand for gas in the week following the price increase?

Choose 1 answer:

• 2.5

• -0.75

• 0.25

• 0.5

Which of the demand curves shown in this graph is perfectly inelastic?

Choose 1 answer:

• D1

• D2

• D3

• D4

• D5

Price elasticity of demand is a concept used to describe what concept in economics?

Choose 1 answer:

• the magnitude of the change in quantity due to a change in income

• the magnitude of the change in quantity due to a change in price

• how responsive sellers are to a change in the price of a good

• whether quantity demanded increases or decreases when price increases

• how responsive output is to a change in government spending

Which of the following would be an indication that a firm has an elastic demand for its goods?

Choose 1 answer:

• Consumer spending increases when it raises its price

• Total revenue increases when it lowers its price

• Consumer spending decreases when it lowers its price

• Total revenue doesn’t change when it raises its price

• Total revenue doesn’t change when it lowers its price

A good is considered relatively elastic when the elasticity of demand is

• equal to 0

• greater than -1 but less than 0

• equal to -1

• greater than 1

3. Elasticity of demand measures the responsiveness of _____.

• price as quantity demand changes

• quantity demanded as price changes

• demand as supply shifts.

• price as demand shifts

A good is considered relatively inelastic if the elasticity of demand is _____

• 0

• equal to 1

• less than 1

• greater than 1

The elasticity of demand is always _____

• positive

• greater than 1

• less than 1

• negative

Which of the following product or service would likely be inelastic?

• The medicine you need to lower your blood pressure.

• Transportation provided by the only taxi service in your town.

• The textbook required for your class that cannot be substituted.

• All of the answers are correct.

The formula for the price elasticity of demand uses which of the following in the denominator?

• the average price of the product

• the quantity demanded for the product

• the percentage of change in the price of the product

• the change in the quantity demanded