E.11: Price elasticity of supply and demand

If the price of a good increases and the quantity demanded decreases only slightly, what is the demand considered to be?

• Elastic
• Inelastic
• Unitary
• Perfectly elastic

Why is understanding price elasticity of supply and demand important for businesses?

• To calculate taxes
• To make informed decisions about pricing and production
• To increase government subsidies
• To understand consumer preferences

If the price of a good increases by 10% and the quantity supplied increases by 5%, what is the price elasticity of supply?

• 0.5
• 2
• -0.5
• -2

What does price elasticity of supply measure?

• How much the price changes when quantity supplied changes
• How much the quantity demanded responds to a change in price
• How much the quantity supplied responds to a change in price
• How much the price changes when quantity demanded changes

If a product has elastic demand, what might a business need to do to increase sales?

• Raise prices
• Keep prices the same
• Lower prices
• Increase production costs

What can policymakers do if a good has elastic demand and they want to increase consumption?

• Increase subsidies
• Impose lower taxes
• Do nothing
• Impose higher taxes

If the price of a good increases and the quantity demanded changes significantly, what is the demand considered to be?

• Unitary
• Elastic
• Perfectly elastic
• Inelastic

What can policymakers do if a good has inelastic demand and they want to reduce consumption?

• Impose higher taxes
• Do nothing
• Impose lower taxes
• Increase subsidies

What does a positive price elasticity of supply value indicate?

• The supply is perfectly elastic
• The supply is unitary
• The supply is elastic
• The supply is inelastic

What can businesses do if a product has inelastic demand?

• Increase production costs
• Keep prices the same
• Lower prices
• Raise prices