ECO 204 Quiz 03

In general, elasticity is a measure of

• the extent to which advances in technology are adopted by producers.

• the extent to which a market is competitive.

• how firms’ profits respond to changes in market prices.

• how much buyers and sellers respond to changes in market conditions.

The price elasticity of demand measures how much

• quantity demanded responds to a change in price.

• price responds to a change in quantity demanded

• quantity demanded responds to a change in income

• demand responds to a change in supply.

For a good that is a necessity,

• quantity demanded tends to respond substantially to a change in price.

• demand tends to be inelastic.

• demand tends to be elastic.

• 1% change in price leads to more than 1% change in quantity demanded

If the price elasticity of demand for a racing motorbike is (-3), the shape of the product demand curve is:

• steep

• flat

• vertical

• horizontal

A good will have a more elastic demand,

• the greater the availability of close substitutes.

• the broader the definition of the market.

• the shorter the period of time.

• the more it is regarded as a necessity.

The difference between slope and elasticity is that

• slope is a ratio of two percentage changes, and elasticity is a ratio of two changes.

• slope measures changes in quantity demanded more accurately than elasticity.

• slope is a ratio of two changes, and elasticity is a ratio of two percentage changes.

• none of the above; there is no difference between slope and elasticity.

Refer to the Figure, between point A and point B,

• the slope is equal to -1/4 and the price elasticity of demand is equal to -2/3.

• the slope is equal to -3/2 and the price elasticity of demand is equal to -1/4.

• the slope is equal to -1/4 and the price elasticity of demand is equal to -3/2.

• the slope is equal to -2/3 and the price elasticity of demand is equal to 3/2.

Which of the following is not possible?

• Demand is elastic, and a decrease in price causes an increase in revenue.

• Demand is inelastic, and an increase in price causes an increase in revenue.

• Demand is perfectly inelastic, and an increase in price causes an increase in revenue.

• Demand is unit elastic, and a decrease in price causes an increase in revenue.

  

If a good is an inferior, then

• the income elasticity of demand will be zero.

• the income elasticity of demand will be positive.

• a decrease in income will cause demand to decrease.

• the income elasticity of demand will be negative.

As price elasticity of supply increases, the supply curve

• becomes flatter.

• becomes steeper.

• becomes downward sloping.

• shifts to the right.