Deck 6: Demand and Elasticity

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

Perfectly inelastic demand curves are vertical.

Answer 3

True

Question 4

Perfectly elastic demand curves are vertical.

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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 12

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

Question 13

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

Question 14

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 15

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

Question 16

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 17

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.

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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 26

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 27

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

Question 28

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 29

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 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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 35

Elasticity of demand is another way to measure slope.

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

Total expenditure equals price times quantity.

Question 45

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

Question 46

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

Question 47

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

Question 48

Buyers' expenditures and sellers' revenues are always identical.

Question 49

Total expenditure equals price times elasticity.

Question 50

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

Question 51

Demand elasticity equals quantity times price.

Question 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

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

Question 62

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

Question 63

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

Question 64

Necessities such as food and shelter have inelastic demand.

Question 65

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

Question 66

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

Question 67

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 68

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

Question 69

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

Question 70

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

Question 71

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 72

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

Question 73

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

Question 74

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

Question 75

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

Question 76

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

Question 77

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

Question 78

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

Question 79

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

Question 80

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