Question 1

A perfectly inelastic supply curve is vertical.

Accepted Answer

A perfectly inelastic supply curve means that the quantity supplied does not change with a change in price. This would result in a vertical supply curve.

Question 2

Price elasticity of demand is a measure of the relative responsiveness of the change in quantity demanded to a change in price.

Accepted Answer

Price elasticity of demand measures the percentage change in quantity demanded due to a percentage change in price, indicating how sensitive customers are to changes in price. Therefore, it is a measure of the relative responsiveness of the change in quantity demanded to a change in price.

Question 3

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

Demand for a good is said to be inelastic if the quantity demanded changes relatively little when the price changes. In other words, a change in price has a minor effect on the quantity demanded.

Question 4

Demand tends to be more elastic, the greater the number of good substitutes, the greater the fraction of one's income devoted to a product and the greater the time allowed to respond to a price change.

Accepted Answer

This statement is true. When there are more substitutes for a product, consumers are more likely to switch to a different product if the price of one product increases. When the fraction of one's income devoted to a product is high, price changes have a greater impact on a consumer's budget and may lead to a change in consumption. Finally, when consumers have more time to respond to price changes, they can take the time to research their options and make decisions that best fit their budget and preferences. All of these factors contribute to greater price sensitivity, or elasticity, of demand.

Question 5

If a huge percentage change in price leads to a small percentage change in quantity demanded, then demand is said to be inelastic.

Accepted Answer

This statement correctly defines the concept of price elasticity of demand, where a low value of price elasticity of demand (less than 1) indicates inelastic demand. A big change in price would only bring a small change in the quantity demanded, meaning that the demand is not very responsive to changes in price.

Question 6

If the price elasticity coefficient equals 4.2, then demand is relatively inelastic with regard to price.

Accepted Answer

A price elasticity coefficient of 4.2 indicates that demand is relatively elastic with regard to price, not inelastic. A coefficient of 1 or lower would indicate relatively inelastic demand.

Question 7

A perfectly elastic demand curve is vertical.

Accepted Answer

A perfectly elastic demand curve is horizontal, indicating that any small change in price will lead to an infinite change in the quantity demanded.

Question 8

The quantity of gasoline demanded will respond more to a change in price over three weeks than over three years.

Accepted Answer

Over a longer period, such as three years, consumers have more time to adjust their behavior and make decisions such as buying more fuel-efficient vehicles or using alternative modes of transportation, leading to a greater response in the quantity of gasoline demanded to a change in price.

Question 9

Using the midpoint method for calculating the price elasticity of demand, you get the same elasticity of demand between two points, whether you are moving up the demand curve or down it.

Accepted Answer

The midpoint method of calculating the price elasticity of demand is symmetrical and results in the same elasticity regardless of whether the price is increasing or decreasing. Therefore, the statement is true.

Question 10

Demand is relatively elastic when the price elasticity coefficient exceeds 1.0.

Accepted Answer

When the price elasticity coefficient exceeds 1.0, it indicates that a small change in the price results in a relatively larger change in the quantity demanded. This means that demand is relatively elastic as consumers are highly responsive to price changes.

Question 11

The widespread availability of e-mail has likely increased the price elasticity of demand for the services of the U.S. Postal Service.

Accepted Answer

With the availability of e-mail, more people have shifted to electronic communication, reducing the demand for traditional mail services. This increased availability and use of e-mail has made the demand for postal services more sensitive to price changes, making it more elastic. As a result, the postal service may have to reduce its prices to remain competitive and retain its customers.

Question 12

The flatter the demand curve passing through a given point, the less elastic the demand curve at that point.

Accepted Answer

A flatter demand curve indicates greater elasticity, meaning that quantity demanded is more responsive to price changes at that point.

Question 13

If Pizza Hut decreases its price for a large pizza by 25% and this leads to a 75% increase in sales, we can conclude that demand is relatively elastic with regard to price over that range.

Accepted Answer

A decrease in price of 25% leads to a significant increase in sales by 75%. This suggests that customers are very responsive to changes in price, indicating that demand is relatively elastic. If demand were inelastic, customers would not respond as strongly to the price decrease, and sales would not increase by such a large amount.

Question 14

If good A had twice as many good substitutes as good B, but good B consumed twice the amount of a buyers income as good A, goods A and B would have the same elasticity of demand.

Accepted Answer

The elasticity of demand depends on multiple factors, including the availability of substitutes and the proportion of income spent on the good. More substitutes typically increase elasticity, while a higher income proportion decreases it. Therefore, goods A and B would not necessarily have the same elasticity of demand.

Question 15

If the demand curve for X has twice the elasticity of the demand curve for Y, then for the same percentage decrease in price, the percentage increase in the quantity of X demanded would be twice that for Y.

Accepted Answer

This statement is consistent with the formula for price elasticity of demand, which states that elasticity is equal to the percentage change in quantity demanded divided by the percentage change in price. If the demand curve for X has twice the elasticity of the demand curve for Y, then a given percentage change in price will result in a proportionally larger percentage change in quantity demanded for X than for Y. Specifically, a given percentage decrease in price will result in twice the percentage increase in quantity demanded for X as compared to Y.

Question 16

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Accepted Answer

The answer of Demand for a good is said to...

Question 17

Moving along an elastic portion of a demand curve, a small percentage change in price leads to a larger percentage change in quantity demanded.

Accepted Answer

This is the definition of price elasticity of demand, which measures the responsiveness of quantity demanded to a change in price. When demand is elastic, a small change in price results in a relatively large change in quantity demanded.

Question 18

Price elasticity of demand is a measure of the relative responsiveness of the change in price to a change in quantity demanded.​

Accepted Answer

Price elasticity of demand measures the responsiveness of the quantity demanded to a change in price, not the other way around.

Question 19

If a huge percentage change in price leads to a small percentage change in quantity demanded, then demand is said to be elastic.

Accepted Answer

If a large change in price leads to a small change in quantity demanded, then demand is said to be inelastic. Elastic demand occurs when a small change in price leads to a large change in quantity demanded.

Question 20

Moving along the inelastic portion of a demand curve, a large percentage change in price leads to a smaller percentage change in quantity demanded.

Accepted Answer

This is the definition of inelastic demand - it means that changes in price have a relatively smaller impact on the quantity demanded.

Quiz 6: Elasticities