Elasticity quiz

Whenever the price of good A decreases, the demand for good B decreases as well. Goods A and B are

• Complementary goods

• Substitute goods

• Inferior goods

• Normal goods

If a 15% decrease in the price of the good results in a 45% increase in quantity demanded, what is the elasticity of the good?

• 1

• 2

• 3

• 4

Price elasticity of demand is defined as the ____________ changes in quantity demanded divided by the _____________ change in price.

• total; percentage

• percentage; marginal

• marginal ; percentage

• percentage; percentage

If an increase in the price of one good causes an increase in the demand for another good, those goods are substitutes.

• True

• False

An elasticity of 0.5 means a normal, luxury good.

• True

• False

Inferior goods are purchased more at a higher income levels

• True

• False

A positive cross elasticity implies that goods are complementary.

• True

• False

The more substitutes there are for a good, the more elastic the demand for it becomes

• True

• False

The more important a good is, the inelastic the good is.

• True

• False

If elasticity is greater than 1, demand is said to be _______.

• Elastic

• Inelastic

• Unitary