Micro_Lecture_5

What does elasticity measure in economics?

• How much quantity demanded changes with income

• Responsiveness of quantity demanded or supplied to changes in price

• Relationship between supply and demand

• How much price changes due to demand shifts

The price elasticity of demand is calculated by:

• Dividing the percent change in price by percent change in quantity demanded

• Subtracting the initial price from the final price

• Multiplying quantity and price

• Dividing the percent change in quantity demanded by percent change in price

If a product's demand is inelastic, this means:

• Demand changes greatly with a small price change

• Demand changes very little with a price change

• There are many substitutes available

• The product is considered a luxury

Which of the following has an elastic demand?

• Gasoline

• Luxury cruise vacations

• Salt

• Medicine

The midpoint method is used to calculate elasticity to avoid:

• Using incorrect price values

• Units affecting the results

• Changes in demand

• Negative numbers

If demand is perfectly elastic, the demand curve is:

• Vertical

• Downward sloping

• Horizontal

• Curved

An example of perfectly inelastic demand would be:

• Designer handbags

• Insulin for diabetes patients

• Movie tickets

• Coffee

What is the price elasticity of demand if a 5% increase in price leads to a 10% decrease in quantity demanded?

• 0.5

• 2

• 1

• 10

If the price elasticity of demand is greater than 1, demand is:

• Inelastic

• Unit elastic

• Elastic

• Perfectly inelastic

The availability of close substitutes generally makes demand:

• Less elastic

• More elastic

• Unit elastic

• Inelastic