Elasticity of demand Practice

Describe your demand for a product if you buy the same amount of it or just a small amount less after a large price increase.

• elastic

• unitary elastic

• inelastic

• hyperelastic

Which of the following is an example of inelastic demand?

• Jason wants the most expensive cellphone. He decides to get a cheaper model.

• Priya wants to go to the season-opening game. Tickets to another game cost less, but she still buys tickets for the opener.

• Tianna wants to try out a new, expensive restaurant. She goes to another restaurant whose food is excellent and costs less.

• Shawn wants to buy a house in one neighborhood. But after searching, he decides to buy a house elsewhere instead.

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

• relatively inelastic

• relatively elastic

• unit elastic

• perfectly elastic

• perfectly inelastic

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

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

• less than one

• equal to one

• greater than one

• zero

What are substitutes?

• Lower quality goods that we consume when we are on lower incomes

• Higher quality versions of goods that we consume more of as our incomes rise

• Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport

• Goods that can be used in place of each other

• Goods that we consume/use together

What are complements?

• Lower quality goods that we consume when we are on lower incomes

• Higher quality versions of goods that we consume more of as our incomes rise

• Our basic needs. Things we need to survive e.g. housing clothing, food, power, transport

• Goods that can be used in place of each other

• Goods that we consume/use together

when consumers have an urgent need for a product

• the demand curve is inelastic

• the demand curve is elastic

• the demand curve is complementary

• the demand curve is unit demand

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