Deck 6: Demand and Elasticity

Question 1

Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.

Answer 1

True

Question 2

Elasticity computations related to demand carry a minus sign to show that the demand curve is negatively sloped.

Answer 2

False

Question 3

The quantity demanded in a market depends on many things, but the concept of elasticity focuses on the effect of changes in the price of the good.

Answer 3

True

Question 4

If the price changes for a good for which the demand is perfectly inelastic, the response will be infinitely large.

Question 5

The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.

Question 6

The price elasticity of demand measure is generally stated as an absolute value.

Question 7

Elasticity of demand is calculated by dividing the change in quantity by the change in the price of a good.

Question 8

Perfectly elastic demand curves are vertical.

Question 9

The sign of the elasticity computation is important because the value of the price elasticity can be negative or positive.

Question 10

Elasticity of demand equals the ratio of the percentage change in the quantity demanded to the percentage change in the price of the good.

Question 11

The demand curve depicts quantities demanded that have been gathered as prices have changed over time.

Question 12

Elasticity of demand is calculated using percentage changes in both price and quantity.

Question 13

The elasticity formula solves the units problem because percentages are unaffected by the units of measure.

Question 14

Computations of the price elasticity focus on the calculated magnitude due to of the law of demand.

Question 15

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

Question 16

Elasticity of demand equals the ratio of the percentage change in the price of a good to the percentage change in the quantity demanded.

Question 17

Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.

Question 18

Perfectly inelastic demand curves are vertical.

Question 19

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

Question 20

A line that is perfectly elastic has an elasticity of demand of zero.

Question 21

The slope of the demand curve conveys all the useful information about elasticity.

Question 22

A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.

Question 23

The value of the price elasticity of demand for a straight-line demand curve starts with low elasticity values at high prices and has high elasticity values at low prices.

Question 24

Whenever the elasticity value for a demand curve is greater than zero, then the demand is labeled as "elastic."

Question 25

The elasticity of a straight-line demand curve is the same as its slope.

Question 26

A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.

Question 27

The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.

Question 28

Elasticity of demand is another way to measure slope.

Question 29

The unit-elastic demand curve bends in the middle toward the origin of the graph and at either end moves closer to the axes.

Question 30

When the goods of competing companies are identical, consumers have no reason to prefer one product over the other, so the demand curve for each manufacturer will be perfectly elastic.

Question 31

A straight-line demand curve has the same elasticity throughout its length.

Question 32

A unit-elastic demand curve will be concave toward the origin .

Question 33

A vertical demand curve has an elasticity of demand equal to zero.

Question 34

The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage change.

Question 35

If the reciprocal of the slope of a demand curve is calculated, this value is equal to the price elasticity of demand for that good.

Question 36

The elasticity of a demand curve at any point can be ascertained by its steepness.

Question 37

A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.

Question 38

The elasticity of any demand curve is the same as its slope.

Question 39

A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity demanded.

Question 40

A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.

Question 41

Demand elasticity equals quantity times price.

Question 42

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

Question 43

If demand is inelastic, a drop in price will raise total expenditure.

Question 44

If demand is elastic, an increase in price will decrease total revenue.

Question 45

If demand is unit elastic, then a 10 percent increase in price will lead to a 10 percent drop in quantity demanded.

Question 46

A rise in price will always result in an increase in the total amount that consumers spend on a product.

Question 47

If demand is elastic, a rise in price will decrease total expenditure.

Question 48

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

Question 49

Buyers' expenditures and sellers' revenues are always identical.

Question 50

As one moves down a straight-line demand curve, the elasticity decreases.

Question 51

As one moves down a straight-line demand curve, the elasticity increases.

Question 52

All straight-line demand curves have the same elasticity value since the slope is constant.

Question 53

If seller increases the price of the good and the total revenue increases, this implies that the demand for the product is elastic.

Question 54

If demand is elastic, an increase in price will increase total revenue.

Question 55

Total expenditure equals price times elasticity.

Question 56

If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent increase in quantity demanded.

Question 57

If seller increases the price of the good and the total revenue increases, this implies that the demand for the product is inelastic.

Question 58

If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

Question 59

Total expenditure equals price times quantity.

Question 60

As one moves down a straight-line demand curve away from the vertical axis, demand becomes less elastic and then inelastic.

Question 61

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Question 62

Necessities, such as food and shelter, are product purchases that consumers are sensitive to, so the demand is elastic for these goods.

Question 63

The ratio of the percentage change in quantity demanded to the percentage change in income is known as the cross elasticity of demand.

Question 64

If a product constitutes a large portion of a consumer's income, demand will be more inelastic.

Question 65

The elasticity of demand for gasoline is likely to be relatively low in the short term and higher as the period of time gets longer.

Question 66

Elasticity of demand is likely to be higher for less-expensive goods, other things being equal.

Question 67

If there are many close substitutes available for a good, its elasticity of demand will be higher.

Question 68

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

Question 69

Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Question 70

Necessities such as food and shelter have inelastic demand.

Question 71

Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.

Question 72

Knowing the value of the cross elasticity of demand allows us to distinguish between inferior goods and normal goods.

Question 73

If soft drink brands are close substitutes for each other, this implies that the price elasticity for individual brands would be low.

Question 74

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

Question 75

A positive value for the cross elasticity of demand between two good implies that these two goods are substitutes.

Question 76

If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are said to be substitutes.

Question 77

A tax on cigarettes can be expected to reduce teen smoking more than it reduces adult smoking.

Question 78

A price increase will always cause a firm's revenue to fall because they will sell less of the good.

Question 79

A price increase will always increase a firm's revenue.

Question 80

Since housing generally represents a large part of most household budget, the elasticity of demand for housing is likely to be large.