Elasticity Quiz

The price elasticity of demand coefficient indicates:

• Buyer responsiveness to price changes

• The extent to which a demand curve shifts

• The slope of the demand curve

• How far businesses can stretch their fixed costs

Which of the following is NOT a characteristic of the demand for a commodity which is elastic?

• The relative change in quantity demanded is greater than the relative change in price

• Buyers are relatively sensitive to price change

• Total revenue declines if price is increased

• The elasticity coefficient is less than one

A perfectly inelastic demand curve

• Rises upward and to the right, but has a constant slope

• Can be represented by a line parallel to the vertical axis

• Cannot be shown on a two dimensional graph

• Can be represented by a line parallel to the horizontal axis

The price elasticity of demand:

• Is infinitely large in a perfectly inelastic demand curve

• Tends to be inelastic in high-price ranges and elastic in low-price ranges

• Tends to be elastic in high-price ranges and inelastic in low-price ranges.

• Will be the same at each price-quantity combination

In which of the following instances will total revenue decline?

• Price rises and supply is inelastic

• Relatively price inelastic

• Perfectly price inelastic

• Relatively price elastic

The demands for such products as salt, bread, and electricity tend to be:

• Perfectly price inelastic

• Relatively price inelastic

• Perfectly price inelastic

• Relatively price elastic

Cross price elasticity:

When Coefficient is <0, the goods are

• Compliments

• Substitutes

When coefficient >0 the goods are

• Compliments

• Substitutes

If the price of a good decreased by 3% and the total revenue increases, the demand for the product would be:

• Inelastic

• Elastic

• Unit elastic

• Perfectly elastic

Which of the following is true within the elastic range of a firm's demand curve?

• The firm should expand output to increase profit

• An increase in price will also lead to an increase in total cost

• Decrease in price will likely lead to an increase in total revenue

• Marginal revenue is negative