Elasticity

What is price elasticity of demand?

• It measures how much the D responds to a change in P

• It measures how much the S responds to a change in P

Which of the following factors will influence price elasticity of demand?

• Availability of close substitutes

• Definition of the Market and Time Horizon

• Necessities vs. Luxuries

• All of the above

• Consumers are very sensitive to the price of this good.

• Consumers are insensitive to the price of this good.

• Consumers are indifferent to the price of this good.

• Consumers will buy this good regardless of price.

What does an elastic demand curve look like?

• downward sloping

• vertical

• very flat to horizontal

• upward sloping

Mathemtically, the coefficient of an elastic demand curve would be?

• greater than one

• greater than zero

• equal to zero

• equal to one

What does an inelastic demand curve look like?

• horizontal

• very steep to vertical

• downward sloping

• upward sloping

What mathematically is the coefficient of elasticity for an inelastic demand curve?

• less than one

• one

• zero

• greater than one

What is the interpretation of "unit elasticity"?

What is the relationship between Total Revenue and when price decrease?

• In the inelastic range of the D curve, TR goes up.

• In the elastic range of the D curve, TR stay the same.

• In the inelastic range of the D curve, TR stay the same.

• In the elastic range of the D curve, TR goes up.

Negative income elasticities suggest that these types of goods are:

• luxuries

• inferior

• normal

• necessary