Elasticities

Price elasticity of demand is given by

• a     the change in quantity demanded divided by the change in price

• b     the percentage change in price divided by the percentage change in quantity demanded

• c     the percentage change in quantity demanded divided by the percentage change in price

• d     the change in demand divided by the percentage change in price

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

• a     PED > 0 / PED < 0

• b     PED < 0 / PED > 0

• c     PED > 1 / PED < 1

• d     PED < 1 / PED > 1

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

• is constant throughout the range of the demand curve

• decreases throughout as P falls

• increases throughout as P falls

• at first increases, reaches a maximum, and then begins to decrease

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

• less than one

• equal to one

• greater than one but less than infinity

• infinity

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

• less than one

• equal to one

• greater than one

• zero

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

• less than one

• equal to one

• greater than one

• zero

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

• less than one

• greater than one but less than infinity

• zero

• infinity

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

• infinity

• equal to one

• greater than one but less than infinity

• zero

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

• greater than one but less than infinity

• equal to one

• less than one

• infinity

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