Chapter 5 Principles of Microeconomics 2113

In general, elasticity is the friction that develops between buyers and sellers in a market.

• True

• False

The price elasticity of demand measures a buyer’s responsiveness to a change in the price of a good.

• True

• False

Demand is said to be elastic if the price of the good responds substantially to changes in demand.

• True

• False

When quantity demanded responds only slightly to changes in price, demand is said to be unit elastic.

• True

• False

Demand for a good would tend to be more inelastic the fewer the available substitutes.

• True

• False

Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because it must be eaten quickly.

• True

• False

A good will have a more inelastic demand the greater the availability of close substitutes.

• True

• False

The greater the price elasticity of demand the more likely the product is a necessity.

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• False

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price would result in a 4.0 percent decrease in the quantity demanded.

• True

• False

If a 15 percent increase in price causes a 30 percent decrease in quantity demanded, this product might have no close substitute.

• True

• False