Understanding Elasticity and Total Revenue

The video tutorial explains the concept of elasticity in economics, focusing on how price changes affect the quantity demanded. It covers inelastic and elastic demand, using gasoline as an example of inelastic demand due to its few substitutes and necessity. The video also introduces the elasticity of demand coefficient and the total revenue test, which helps determine whether demand is elastic or inelastic. The tutorial concludes with a brief mention of upcoming topics like cross price and income elasticity.

What happens to the quantity demanded when the price of a product with inelastic demand increases?

• It increases significantly.

• It decreases slightly.

• It remains unchanged.

• It decreases significantly.

Why do products with inelastic demand have few substitutes?

• They are non-essential.

• They are easily replaceable.

• They are luxury items.

• They are necessities.

How is the elasticity of demand coefficient calculated?

• Absolute change in price divided by absolute change in quantity.

• Percent change in quantity divided by percent change in price.

• Absolute change in quantity divided by absolute change in price.

• Percent change in price divided by percent change in quantity.

What does it mean if a product has an elasticity coefficient greater than one?

• The product is perfectly inelastic.

• The product is inelastic.

• The product is unit elastic.

• The product is elastic.

What is the elasticity coefficient of a perfectly inelastic demand curve?

• Greater than one

• One

• Infinite

• Zero

In the total revenue test, what happens to total revenue when the price increases for a product with inelastic demand?

• Total revenue decreases.

• Total revenue remains the same.

• Total revenue increases.

• Total revenue fluctuates.

Why do products with elastic demand often have sales?

• To maintain total revenue.

• To increase total revenue.

• To stabilize the market.

• To decrease total revenue.

What does the 'I' gesture represent in the total revenue test?

• Inelastic demand

• Perfectly elastic demand

• Unit elastic demand

• Elastic demand

If the price of a product goes down and total revenue goes up, what type of demand does the product have?

• Inelastic demand

• Elastic demand

• Unit elastic demand

• Perfectly inelastic demand

What is the significance of the total revenue test in understanding elasticity?

• It helps determine the price of a product.

• It shows the relationship between price changes and total revenue.

• It calculates the elasticity coefficient.

• It identifies the substitutes for a product.