Elasticity

If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of a good, demand is:

• Relatively inelastic
• Relatively elastic
• Perfectly elastic
• Perfectly inelastic

A product is likely to have a price elasticity of demand that exceeds 1 when:

• Its price falls

• It is a necessity

• It has close substitutes

• Consumers are not very responsive to changes in price

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

Ford Trucks have seen a increase in demand of 27%, while the price has decreased 15%

• .56 inelastic

• .56 elastic

• 1.8 inelastic

• 1.8 elastic

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

• .5 inelastic

• .5 elastic

• 2 inelastic

• 2 elastic

The price elasticity of demand measures how much

• quantity demanded responds to a change in price.
• quantity demanded responds to a change in income.
• price responds to a change in demand.
• demand responds to a change in supply.

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• There are many substitutes for this good.
• The good is a necessity.
• The market for the good is narrowly defined.
  
• The relevant time horizon is long.

A key determinant of the price elasticity of supply is

• the ability of sellers to change the price of the good they produce.
• the ability of sellers to change the amount of the good they produce.
• how responsive buyers are to changes in sellers' prices.
• the slope of the demand curve.