chap 5

The price elasticity of demand measures

• buyers’ responsiveness to a change in the price of a good

• the extent to which demand increases as additional buyers enter the market

• how much more of a good consumers will demand when incomes rise.

• the movement along a supply curve when there is a change in demand.

The price elasticity of demand for eggs

• will be lower if there is a new invention that is a close substitute for eggs

• is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs

• will be higher if consumers consider eggs to be a necessity.

• All of the above are correct

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• There are no close substitutes for this good.

• The good is a luxury

• The market for the good is broadly defined

• The relevant time horizon is short

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• There are many substitutes for this good

• The good is a necessity

• The market for the good is broadly defined

• The relevant time horizon is short

For a particular good, a 10 percent increase in price causes a 5 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• There are many close substitutes for this good.

• The good is a necessity

• The market for the good is narrowly defined

• The relevant time horizon is long

For a particular good, a 10 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• There are no close substitutes for this good.

• The good is a necessity

• The market for the good is broadly defined

• The relevant time horizon is long

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• There are many close substitutes for this good.

• The good is a luxury

• The market for the good is broadly defined

• The relevant time horizon is long

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• The relevant time horizon is short

• The good is a luxury.

• The market for the good is narrowly defined

• There are many close substitutes for this good

Which of the following is likely to have the most price elastic demand?

• gasoline in the short run

• dentist’s visits

• ice cream

• deodorant

Which of the following is likely to have the most price inelastic demand?

• laptop computers

• iPod shuffles

• designer jeans

• college tuition for a junior or senior