If PED for a good is less than one, then

total revenue will fall if the price falls

total revenue will fall if the price increases

total revenue will rise if the price falls

total revenue will not change if the price rises or falls

If PED for a good is greater than one, then

total revenue will rise if the price falls

total revenue will fall if the price falls

total revenue will rise if the price increases

total revenue will not change if the price rises or falls

If PED for a good is equal to one, then

total revenue will not change if the price rises or falls

total revenue will fall if the price falls

total revenue will rise if the price increases

total revenue will rise if the price falls

Suppose that the PED for socks is 0.7. If the price of socks is reduced by 10% how will sales be effected?

sales will decrease by less than 10%

sales will grow by more than 10%

sales will grow by less than 10%

Income elasticity of demand, or YED , is given by

a the percentage change in income divided by the percentage change in price

c the percentage change in income divided by the percentage change in quantity demanded

Suppose income increases from $15,000 to $18,000, consumption of hotdogs falls by 10% and consumption of steaks increases by 15%. Identify the true statement below.

d Steaks have a YED of 0.75 and are a normal good and a necessity.

a Hotdogs have a YED of 5 and are an inferior good.

b Hotdogs have a YED of 5 and are a normal good.b Hotdogs have a YED of 5 and are a normal good.

c Steaks have a YED of 0.75 and are a normal good and a luxury.

16 The price elasticity of supply measures the responsiveness of _______________ to changes in ____________________.

c quantity supplied / quantity demanded

If a firm needs a long time to respond to changes in the price of the good it sells, the PES value will likely be

less than one but greater than zero

18 If a firm finds it very easy and costless to shift their resources into and out of the production of a good, the PES value will likely be

less than one but greater than zero

If firms have limited ability to store stocks of the good they produce, the PED value will likely be

less than one but greater than zero

If firms have a relatively large amount of excess capacity, the PES for the good they produce will likely be

less than one but greater than zero

A straight-line demand curve with a steep slope has

an undetermined PED value without more information

Which of the following statements is true?

b PED for primary commodities tends to be inelastic because they often have no substitutes and are necessities.

a PED for manufactured goods tends to be elastic because they have few substitutes.

c PED for manufactured goods tends to be inelastic because they have many substitutes.

d PED for primary commodities tends to be elastic because they often have substitutes and are not necessities.

a price inelastic supply curve emerges from

the quantity axis of a market diagram

the price axis of a market diagram

either the price or quantity axis but never the origin of a market diagram

A unit elastic supply curve emerges from

the price axis of a market diagram

the quantity axis of a market diagram

either the price or quantity but never the origin of a market diagram

Primary commodities tend to have lower PES than manufactured goods because

producers of primary commodities usually have low mobility of their factors of production

producers of primary commodities rarely have excess capacity

primary commodities often take more time to produce than manufactured goods

primary commodities have lower prices so firms do not care to increase production

Income elastic demand can be used to explain why rising incomes over time are associated with

an increasingly smaller services sector

an increasingly larger agricultural sector

an increasingly smaller manufacturing sector

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Elasticities

28 questions

Price elasticity of demand is given by

Demand is said to be price elastic when and price inelastic when .

The PED of a straight-line demand curve with a negative slope

If a good is a necessity, its PED value will be

If a good’s percentage change in quantity demanded is equal to its change in price, the PED value will be

If a good has many close substitutes, the PED value for that good is likely to be

If a good takes up a large percentage of one’s income, the PED for that good is likely to be

If quantity demanded for a good is completely unresponsive to a change in price, the PED for that good will be

If a decision to buy a good must be made very quickly, the PED value for that good is likely to be

If PED for a good is less than one, then

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Elasticities

28 questions

Price elasticity of demand is given by

Demand is said to be price elastic when ______________ and price inelastic when ______________.

The PED of a straight-line demand curve with a negative slope

If a good is a necessity, its PED value will be

If a good’s percentage change in quantity demanded is equal to its change in price, the PED value will be

If a good has many close substitutes, the PED value for that good is likely to be

If a good takes up a large percentage of one’s income, the PED for that good is likely to be

If quantity demanded for a good is completely unresponsive to a change in price, the PED for that good will be

If a decision to buy a good must be made very quickly, the PED value for that good is likely to be

If PED for a good is less than one, then

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Demand is said to be price elastic when and price inelastic when .