AS Economics Elasticities

The data shows both short-term and long-term changes in the quantities of a product that are supplied to a market in response to an increase in its price from $20 to $25 per unit.

What are the short-term and long-term price elasticities of supply for the product?

• A

• B

• C

• D

The diagram shows four supply curves.

Which statement about the price elasticities of the curves is correct?

• Curve 1 has constant infinite elasticity

• Curve 2 has elasticity greater than curve 4 over its whole length

• Curve 3 has increasing elasticity as price rises

• Curve 4 has decreasing elasticity as price rises.

It was estimated in 2015 that milk had an income elasticity of demand of -0.6.

What can be concluded about milk from this information?

• It accounts for only a small proportion of household expenditure.

• It has very few substitutes.

• Household expenditure on milk will decrease if the price of milk increases.

• It is an inferior good.

Over a four year period, as the price of new houses increases, the price elasticity of supply for new houses falls, as shown. All new houses were sold.

What shows price elasticity of supply became more inelastic from year to year?

• Dollar revenues to house builders declined each year

• Each year, the government released more land for house building

• The proportionate price change was greater than the proportionate supply change

• The proportionate price change was the same as the proportionate supply change

In the diagram D1 is a straight line demand curve and D2 is a rectangular hyperbola curve.

Which statement is correct?

• D2 is more elastic than D1 at point M

• D2 is more elastic than D1 at point N

• The elasticity of demand increases on moving down both curves

• The elasticity of demand is inelastic at point M on both curves

In which situation is the demand for a product said to be price elastic?

• The quantity demanded responds to a change in price

• An increase in price brings about a decrease in the quantity demanded

• An increase in price induces consumers to spend more on the product

• A decrease in price brings about an increase in revenue

The table shows the price of a good and total expenditure on the good during specific periods when the market is in equilibrium.

What can be deduced from this data?

• The good has constant opportunity cost

• The good is an inferior good

• The price elasticity of demand is equal to one

• The price elasticity of supply is equal to zero

The supply function for a good can be written as Q = 2P + 10, where Q is the quantity supplied in kilos and P is the price per kilo in dollars.

The price rises from $10 to $15 per kilo.

The value of price elasticity of supply for this price increases lies in a range from

• 1/6 to 1/4

• 3/8 to 1/2

• 2/3 to 3/4

• 5/4 to 3/2

A firm has a perfectly elastic supply curve at the market price of $10.

Which statement about the firm is correct?

• At any price above $10 quantity supplied is zero

• At any price below $10 quantity supplied is infinite

• A price $10 the firm will supply any quantity

• At price $10 the firm will break even

The diagram shows the relationship between total expenditure and price for three products, 1, 2 and 3.

Which curves represent the product with price elastic and unitary price elastic demand?

• A

• B

• C

• D