Elasticity Practice- Supply and Demand

Jacob Clifford introduces elasticity concepts, focusing on demand, supply, cross-price, and income elasticity. He provides practice questions to help students understand these concepts, emphasizing the total revenue test and elasticity coefficients. The video covers how to calculate elasticity and interpret results, including identifying substitutes and complements, and distinguishing between normal and inferior goods.

What is the primary focus of the video tutorial?

• To practice elasticity calculations

• To explain the law of demand

• To discuss the midpoint formula

• To introduce the concept of elasticity

In the total revenue test, if the price increases and total revenue decreases, what can be inferred about demand?

• Demand is inelastic

• Demand is elastic

• Demand is unit elastic

• Demand is perfectly elastic

What is the formula for calculating the elasticity of demand coefficient?

• Percent change in price divided by percent change in quantity

• Price divided by total revenue

• Percent change in quantity divided by percent change in price

• Total revenue divided by quantity

Why is the elasticity of demand coefficient always negative?

• Because price and quantity move in the same direction

• Because of the law of supply

• Because price and quantity move in opposite directions

• Because it is calculated using absolute values

What does a positive elasticity of supply indicate?

• Supply is unit elastic

• Supply is elastic

• Supply is perfectly inelastic

• Supply is inelastic

Why can't the total revenue test be used for supply?

• Because supply is always elastic

• Because price and total revenue are directly related

• Because price and total revenue are inversely related

• Because supply is always inelastic

If the cross-price elasticity between two goods is negative, what does it imply?

• The goods are unrelated

• The goods are inferior

• The goods are substitutes

• The goods are complements

What does a positive cross-price elasticity indicate about two goods?

• They are substitutes

• They are inferior goods

• They are complements

• They are unrelated

What does a negative income elasticity of demand suggest about a good?

• It is an inferior good

• It is a substitute good

• It is a normal good

• It is a luxury good

If income increases and the demand for a good decreases, what type of good is it?

• Substitute good

• Luxury good

• Inferior good

• Normal good