Elasticity of Supply and Other Elasticities

Assume a 10% increase in price increased the market quantity supplied by 20%. Which of the following is true?

• The value of the price elasticity of supply is 2.

• The value of the price elasticity of supply is 0.5

• Supply is price inelastic

• Demand is Price elastic

• This price-quantity combination violates the law of supply

If the value of the price elasticity of supply is 3, which of the following is true?

• Supply is inelastic

• A percentage increase in price will lead to a relatively smaller percentage increase in quantity supplied

• The supply curve is downward sloping with respect to the price of output

• A 10% decrease in price will decrease the quantity supplied by 30%

• A 3% increase in price will decrease the quantity supplied by 10%

Assume that the price elasticity of supply for good Y is 0.5. If the price of good Y decreases by 30%, the quantity supplied of good Y will

• Decrease by 60%

• Decrease by 30%

• Decrease by 15%

• Increase by 0.5%

• Increase by 0.15%

The cross-price elasticity of demand between goods J and K is -3. A 20% decrease in the price of good K will result in a

• 3% decrease in the quantity demanded of good K

• 15% decrease in the quantity demanded of good K

• 6% increase in the quantity demanded of good J

• 12% increase in the quantity demanded of good J

• 60% increase in the quantity demanded of good J

Which of the following statements relating to income elasticity is true?

• 1. A positive value for the income elasticity coefficient indicates an inferior good.

• If good X and Y have negative income elasticities, then both goods are substitutes

• With an income elasticity coefficient of 0.6, the demand is inelastic and the good is an inferior good

• With an income elasticity coefficient of 5, a 10% increase in income will lead to a 50% increase in the quantity demanded of the good

• With an income elasticity coefficient of -1.2, a 10% increase in income will lead to a 12% decrease in the price of the good

Assume the income elasticity of demand for good Z equals -5.0. Which of the following is true?

• Good Z is a normal good.

• Good Z must have an inelastic demand

• An increase in income will lead to a decrease in demand

• An increase in income will lead to an increase in demand

• The income effect of a price will be a decrease in quantity demanded at every price