Question 1

The price elasticity of demand is negative because the demand curve slopes downward.

Accepted Answer

The price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in price. A negative value indicates an inverse relationship between price and quantity demanded, meaning that as price goes up, quantity demanded goes down, resulting in a downward-sloping demand curve.

Question 2

If a $1 increase in price changes quantity demanded by 4 units, the price elasticity of demand

Accepted Answer

The answer of If a $1 increase in price changes...

Question 3

Which of the following correctly represents the midpoint formula?

Accepted Answer

The answer of Which of the following correctly represents the...

Question 4

The price elasticity of demand is the same as the slope of the demand curve.

Accepted Answer

The price elasticity of demand is not the same as the slope of the demand curve. While the slope measures the rate of change of quantity demanded with respect to price, elasticity measures the responsiveness of quantity demanded to changes in price. Elasticity also takes into account other factors that can influence demand, such as the availability of substitutes and the proportion of income spent on the good.

Question 5

Which of the following statements about the price elasticity of demand is true?

Accepted Answer

The slope of a demand curve measures the steepness of the curve at a point, while price elasticity of demand measures the responsiveness of quantity demanded to changes in price. The two concepts are related, but they are not the same thing.

Question 6

The price elasticity of demand measures the change in quantity demanded given a dollar change in price.

Accepted Answer

The price elasticity of demand measures the percentage change in quantity demanded given a one percent change in price, not a dollar change.

Question 7

The midpoint formula for calculating price elasticity of demand gives the same answer, regardless of the direction of the price change.

Accepted Answer

The midpoint formula for calculating price elasticity of demand takes into account the proportional change in quantity demanded and price, so it will give the same result regardless of whether the price increases or decreases.

Question 8

The price elasticity of demand measures how much price changes given a change in demand.

Accepted Answer

The price elasticity of demand measures how much quantity demanded changes given a change in price.

Question 9

If a 1 percent change in price results in a 5 percent change in quantity demanded, then

Accepted Answer

The answer of If a 1 percent change in price...

Question 10

The measurement for the price elasticity of demand is

Accepted Answer

The price elasticity of demand is unit-free, meaning it does not depend on the units used to measure price or quantity. It is calculated as the percentage change in quantity demanded divided by the percentage change in price, which gives a unit-free measure of the responsiveness of quantity demanded to a change in price.

Question 11

Suppose that the price of product G increases from $10 to $20 and, in response, quantity demanded declines from 100 to 80. Using the midpoint formula, what is the elasticity of demand?

Accepted Answer

The answer of Suppose that the price of product G...

Question 12

The measurement of the price elasticity of demand is unit free.

Accepted Answer

Price elasticity of demand is a unit-free measure, meaning it is expressed as a pure number without any reference to a specific currency or unit of measure.

Question 13

The price elasticity of demand is a more precise measure of the slope of a demand curve.

Accepted Answer

The price elasticity of demand is a measure of how responsive quantity demanded is to changes in price, while the slope of a demand curve only shows the relationship between price and quantity demanded at one specific point. The two measures are related, but they are not interchangeable.

Question 14

If a 1 percent decrease in the price of steak results in a 2 percent increase in the quantity demanded for steak, then the price elasticity of the demand for steak is

Accepted Answer

The price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. The formula for price elasticity of demand is:
Price elasticity = percentage change in quantity demanded / percentage change in price
Given that a 1% decrease in price leads to a 2% increase in quantity demanded:
Percentage change in quantity demanded = 2%
Percentage change in price = -1%
Substituting these values in the formula:
Price elasticity = 2% / (-1%) = -2
Note that price elasticity is usually expressed as an absolute value, so the answer is 2.

Question 15

The price elasticity of demand is expressed in dollar changes in price and quantity demanded.

Accepted Answer

The price elasticity of demand is expressed as a percentage change in quantity demanded divided by the percentage change in price. It is not expressed in dollar changes.

Question 16

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Accepted Answer

Price elasticity of demand is influenced by the slope of the demand curve. Generally, flatter demand curves have higher price elasticities of demand while steeper demand curves have lower price elasticities of demand. Therefore, it is possible to predict ranges on each demand curve where the price elasticities of demand will be different based on their slopes.

Question 17

Suppose that, as the price of product H falls from $5 to $4, the quantity of H demanded increases from 2,000 to 6,000 units. In this case, what is the elasticity of demand, using the midpoint formula?

Accepted Answer

Using the midpoint formula, we find the percentage change in quantity demanded:

%ΔQd = [(6,000 - 2,000) / ((6,000 + 2,000) / 2)] * 100% = 200%

And the percentage change in price:

%ΔP = [(4 - 5) / ((4 + 5) / 2)] * 100% = -22.2%

So the elasticity of demand is:

|%ΔQd| / |%ΔP| = 200% / 22.2% = 9

Note that we take the absolute value of the percentage changes to ensure that the elasticity is positive. Since the elasticity is greater than 1, we can say that the demand for product H is elastic, meaning that a decrease in price leads to a relatively larger increase in quantity demanded.

Question 18

If 12 candy bars are demanded at $.30 each and 4 candy bars are demanded at $.50 each, what is the price elasticity of demand using the midpoint formula?

Accepted Answer

The answer of If 12 candy bars are demanded at...

Question 19

If the price elasticity of demand is equal to 4, a 1 percent increase in the price will cause quantity demanded to increase from 100 to 104 units.

Accepted Answer

If the price elasticity of demand is equal to 4, a 1 percent increase in the price would cause quantity demanded to decrease by 4 percent, not increase. Therefore, the statement is false.

Question 20

Suppose a $1 change in the price of a good results in the quantity demanded changing by .2 percent. Then you know

Accepted Answer

The answer of Suppose a $1 change in the price...

Quiz 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity