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Cards In This Set
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THE PRICE ELASTICITY OF DEMAND COEFFICIENT MEASURES....
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RESPONSIVENESS TO PRICE CHANGES.
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THE BASIC FORMULA FOR THE PRICE ELASTICITY OF DEMAND COEFFICIENT IS
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PERCENTAGE CHANGE IN QUANTITY DEMANDED/PERCENTAGE CHANGE IN PRICE.
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IF THE PRICE ELASTICITY OF DEMAND FOR A PRODUCT IS 2.5, THEN A PRICE CUT FROM $2.00 TO $1.80 WILL
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INCREASE THE QUANTITY DEMANDED BY ABOUT 25 PERCENT.
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WHICH OF THE FOLLOWING IS NOT CHARACTERISTIC OF THE DEMAND FOR A COMMODITY THAT IS ELASTIC?
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THE ELASTICITY COEFFICIENT IS LESS THAN ONE.
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IF THE DEMAND FOR PRODUCT X IS INELASTIC, A 4 PERCENT INCREASE IN THE PRICE OF X WILL
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DECREASE THE QUANTITY OF X DEMANDED BY LESS THAN 4 PERCENT.
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A PERFECTLY INELASTIC DEMAND SCHEDULE
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CAN BE REPRESENTED BY A LINE PARALLEL TO THE VERTICAL AXIS.
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THE PRICE ELASTICITY OF DEMAND OF A STRAIGHT-LINE DEMAND CURVE IS
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ELASTIC IN HIGH-PRICE RANGES AND INELASTIC ON LOW-PRICE RANGES.
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A LEFTWARD SHIFT IN THE SUPPLY CURVE OF PRODUCT X WILL INCREASE EQUILIBRIUM PRICE TO A GREATER EXTENT THE
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MORE INELASTIC THE DEMAND FOR THE PRODUCT
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IF THE DEMAND FOR BACON IS RELATIVELY ELASTIC, A 10 PERCENT DECLINE IN THE PRICE OF BACON WILL
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INCREASE THE AMOUNT DEMANDED BY MORE THAN 10 PERCENT.
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THE PRICE ELASTICITY OF DEMAND IS:
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NEGATIVE, BUT THE MINUS SIGN IS IGNORED.
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THE PRICE ELASTICITY OF DEMAND FOR BEEF IS ABOUT 0.60. OTHER THINGS
EQUAL, THIS MEANS THAT A 20 PERCENT INCREASE IN THE PRICE OF BEEF WILL
CAUSE THE QUANTITY OF BEEF DEMANDED TO:
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DECREASE BY APPROXIMATELY 12 PERCENT.
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IF A DEMAND FOR A PRODUCT IS ELASTIC, THE VALUE OF THE PRICE ELASTICITY COEFFICIENT IS:
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GREATER THAN ONE
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IF THE PRICE OF HAND CALCULATORS FALLS FROM $10 TO $9 AND, AS A RESULT, THE QUANTITY DEMANDED INCREASES FROM 100 TO 125, THEN:
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DEMAND IS ELASTIC.
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MOVING UPWARD ON A DOWNWARD-SLOPING STRAIGHT-LINE DEMAND CURVE, WE FIND THAT PRICE ELASTICITY:
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INCREASES CONTINUOUSLY.
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IF THE PRICE ELASTICITY OF DEMAND FOR GASOLINE IS 0.20:
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A 10 PERCENT RISE IN THE PRICE OF GASOLINE WILL DECREASE THE AMOUNT PURCHASED BY 2 PERCENT.
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