Barriers to Entry in Monopolies
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Questions and Answers

Which of the following factors tends to make demand more price elastic?

  • Necessities versus luxuries
  • Proportion of income devoted to the product
  • Availability of close substitutes (correct)
  • Definition of the market

What does it mean if the price elasticity of demand is greater than 1?

  • The percentage change in quantity demanded is the same as the percentage change in price
  • The percentage change in quantity demanded is greater than the percentage change in price (correct)
  • The percentage change in quantity demanded is less than the percentage change in price
  • The price elasticity is equal to 1 and is called unit or unitary elasticity

Which method is commonly used to calculate price elasticity of demand by measuring elasticity at a particular point on the demand curve?

  • Both methods are equally common
  • Point Elasticity of Demand Method (correct)
  • Midpoint (Arc Elasticity of Demand) Method
  • There is no commonly used method

What happens to total expenditure when demand is price elastic?

<p>Price and total expenditure move in opposite directions (B)</p> Signup and view all the answers

Which of the following factors can cause a decrease in supply?

<p>An increase in input prices (C)</p> Signup and view all the answers

What happens to supply when there are more sellers in the market?

<p>Supply increases (B)</p> Signup and view all the answers

What is the definition of equilibrium in a market?

<p>The price where the quantity demanded is the same as the quantity supplied (A)</p> Signup and view all the answers

What does a surplus indicate in a market?

<p>The quantity supplied is greater than the quantity demanded (A)</p> Signup and view all the answers

Which of the following is NOT an assumption of the competitive market model?

<p>Goods produced are differentiated (B)</p> Signup and view all the answers

What is the outcome of the market model if the assumptions hold?

<p>The resulting allocation of resources will be efficient (B)</p> Signup and view all the answers

What is a competitive market?

<p>A market in which there are many buyers and sellers so that each has a negligible impact on the market price (C)</p> Signup and view all the answers

Why do sellers in a competitive market have little reason to charge less than the going price?

<p>Because products are homogeneous (D)</p> Signup and view all the answers

Which of the following is NOT a source of barriers to entry for a monopoly?

<p>Low production costs (D)</p> Signup and view all the answers

What is the key difference between a competitive firm and a monopoly?

<p>The ability to influence the price of its output (B)</p> Signup and view all the answers

Why does a monopoly firm have to lower the price of its good to increase the amount sold?

<p>To increase total revenue (B)</p> Signup and view all the answers

What are the two effects on total revenue when a monopoly increases the amount it sells?

<p>The output effect and the price effect (A)</p> Signup and view all the answers

Which one of these is the correct formula for calculating the price elasticity of supply using the midpoint method?

<p>(\frac{{\text{{Percentage change in quantity supplied}}}},{{\text{{Percentage change in price}}}} \times \frac{{\text{{Average price}}}},{{\text{{Average quantity supplied}}}}) (C)</p> Signup and view all the answers

Which one of these is a key determinant of the price elasticity of supply?

<p>The size of the firm/industry (C)</p> Signup and view all the answers

What is the formula for calculating total revenue?

<p>Total revenue = price of the good (\times) quantity sold (D)</p> Signup and view all the answers

What is the definition of monopoly?

<p>A firm that is the sole seller of a product without close substitutes (A)</p> Signup and view all the answers

According to the text, what is the key difference between the marginal revenue of a competitive firm and the marginal revenue of a monopoly?

<p>The marginal revenue of a competitive firm is equal to its price, whereas the marginal revenue of a monopoly is less than its price. (D)</p> Signup and view all the answers

What is the efficient outcome in a monopoly market?

<p>The efficient outcome is where the demand curve intersects the marginal cost curve, where P=MC. (D)</p> Signup and view all the answers

What is the welfare cost associated with monopoly?

<p>The welfare cost of monopoly is the deadweight loss. (B)</p> Signup and view all the answers

What does total surplus equal in a monopoly market?

<p>Total surplus equals the value of the good to consumers minus the costs of making the good incurred by the monopoly producer. (C)</p> Signup and view all the answers

Where does the monopolist choose the profit-maximizing output?

<p>The monopolist chooses the profit-maximizing output where the marginal revenue and marginal cost curves intersect. (A)</p> Signup and view all the answers

What is the difference between the socially efficient outcome and the profit-maximizing output in a monopoly market?

<p>The socially efficient outcome is where the demand curve intersects the marginal cost curve, whereas the profit-maximizing output is where the marginal revenue and marginal cost curves intersect. (C)</p> Signup and view all the answers

According to the text, what is the law of demand?

<p>The claim that the quantity demanded of a good falls when the price of the good rises (A)</p> Signup and view all the answers

According to the text, what is a substitute good?

<p>Two goods for which an increase in the price of one leads to an increase in the demand for the other (C)</p> Signup and view all the answers

According to the text, what is an inferior good?

<p>A good for which an increase in income leads to a decrease in demand (A)</p> Signup and view all the answers

According to the text, what is the law of supply?

<p>The claim that the quantity supplied of a good rises when the price of a good rises (B)</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Price Elasticity = A measure of the responsiveness of demand or supply to a change in price Commodity = A product that is identical across producers and can be easily substituted Elastic Demand = A situation in which demand for a product changes more than the change in price Inelastic Demand = A situation in which demand for a product changes less than the change in price</p> Signup and view all the answers

Match the following terms with their interpretations:

<p>Highly Elastic = Product is perceived as a commodity by consumers Relatively Elastic = Product is differentiated and meaningful to customers Price Sensitivity = Qualitative measure of how the demand for a product changes with a change in price Price Elasticity = Quantitative measure of how the demand for a product changes with a change in price</p> Signup and view all the answers

Match the following terms with their effects on price elasticity:

<p>Type of product = Affects how much consumers are willing to pay for a product Income of target consumers = Affects how sensitive consumers are to changes in price Health of the economy = Affects consumers' ability to pay for products Competitors' actions = Affects the availability of substitutes</p> Signup and view all the answers

Match the following terms with their descriptions:

<p>Elasticity = Quantitative concept that measures how much demand or supply responds to a change in price Sensitivity = Qualitative concept that describes how demand or supply responds to a change in price Commodity = A product that is identical across producers and can be easily substituted Differentiation = The process of distinguishing a product or service from others to make it more attractive to a particular target market</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Elasticity = A measure of the responsiveness of demand or supply to a change in price Sensitivity = A qualitative measure of how the demand for a product changes with a change in price Commodity = A product that is identical across producers and can be easily substituted Differentiation = The process of distinguishing a product or service from others to make it more attractive to a particular target market</p> Signup and view all the answers

Match the following terms with their effects on price elasticity:

<p>Type of product = Affects how much consumers are willing to pay for a product Income of target consumers = Affects how sensitive consumers are to changes in price Health of the economy = Affects consumers' ability to pay for products Competitors' actions = Affects the availability of substitutes</p> Signup and view all the answers

Match the following terms with their interpretations:

<p>Highly Elastic = Product is perceived as a commodity by consumers Relatively Elastic = Product is differentiated and meaningful to customers Price Sensitivity = Qualitative measure of how the demand for a product changes with a change in price Price Elasticity = Quantitative measure of how the demand for a product changes with a change in price</p> Signup and view all the answers

Match the following terms to their correct definitions:

<p>Price elasticity of demand = A measure of how sensitive the quantity demanded is to its price Inelastic demand = Changes in price have a relatively small effect on the quantity demanded Elastic demand = Quantity falls twice as much as the price increase A/B test = A method to compare two versions of something to determine which performs better</p> Signup and view all the answers

Match the following elasticity values to their descriptions:

<p>$-2$ = A one percent price rise leads to a two percent decline in quantity demanded $-0.5$ = The quantity response is half the price increase $0$ = Consumption would not change at all, in spite of any price increases $1$ = Revenue is maximised when price is set so that the elasticity is exactly one</p> Signup and view all the answers

Match the following terms to their definitions:

<p>Veblen goods = Goods which have positive elasticity, rare exceptions to the law of demand Giffen goods = Goods which have positive elasticity, rare exceptions to the law of demand Qualitative research = Research that aims to get at the underlying reasons for consumer behavior Quantitative testing = Research that deals with numbers and statistics</p> Signup and view all the answers

Match the following terms with their definitions:

<p>In-market A/B test = Putting your product out at the new price point and seeing what the demand is, and comparing it to the same product at a different price Price point = The price at which a product is sold Consumer behavior = The way consumers act and the decision processes they go through when purchasing a product Elasticity = A measure of a variable's sensitivity to a change in another variable</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Current price elasticity = A data point that helps make future decisions Managing price elasticity = Understanding current price elasticity and the factors that are making it elastic or inelastic, and then thinking about how those factors are changing over time Burden of a tax = Can be predicted using the good's elasticity Digital context = A situation where changing the price of a product is easy and inexpensive</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Willingness to pay = What consumers have historically been willing to pay for a particular product Survey responses = A method to get a good sense of willingness to pay Consumer response = The reaction of consumers to a change in the price of a product Market test = A method to understand why consumers are acting the way they are</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Historical sales data = One of the methods used to determine price elasticity Conjoint analysis = One of the methods used to determine price elasticity Test markets = One of the methods used to determine price elasticity Elasticity of −2 = A good with this elasticity has elastic demand</p> Signup and view all the answers

Match the following terms to their definitions related to price elasticity:

<p>Price elasticity = Shows how responsive customer demand is for a product based on its price Elastic product = Sensitive to fluctuations in price Inelastic product = Largely ambivalent about price changes Substitute goods = Products that can be used in place of others; demand for these increases when the price of the compared product increases</p> Signup and view all the answers

Match the following terms to their descriptions in the context of price setting:

<p>Price increase = A change in the price of a product or service from a lower to a higher amount Price decrease = A change in the price of a product or service from a higher to a lower amount Demand = The quantity of a product or service that consumers are willing and able to purchase Price elasticity of demand = A measure of the responsiveness of quantity demanded to a change in price</p> Signup and view all the answers

Match the following scenarios to the type of product demand they represent:

<p>A clothing company raises the price of a coat from $100 to $120 = Elastic demand The price of beef increases dramatically and demand goes down as people substitute chicken or pork = Elastic demand The price of a life-saving medication increases, but patients continue to buy it because they need it = Inelastic demand A luxury car company raises its prices but sees no significant decrease in sales = Inelastic demand</p> Signup and view all the answers

Match the following terms to their definitions in the context of price and demand:

<p>Price = The amount of money that a customer must pay for a product or service Demand = The desire, ability, and willingness to buy a product or service Elasticity = The degree to which demand or supply reacts to changes in price Inelasticity = The situation in which demand or supply is not sensitive to changes in price</p> Signup and view all the answers

Match the following terms to their definitions in the context of economic theory:

<p>Elastic demand = Demand that is very sensitive to changes in price Inelastic demand = Demand that is not very sensitive to changes in price Substitutes = Goods that can be used in place of each other Price elasticity = A measure of the responsiveness of quantity demanded to a change in price</p> Signup and view all the answers

Match the following terms to their definitions in the context of marketing and pricing:

<p>Price elasticity = A measure of how much the quantity demanded of a good responds to a change in the price of that good Elastic product = A product for which a change in price leads to a substantial change in the quantity demanded Inelastic product = A product for which a change in price leads to a small change in the quantity demanded Substitute goods = Goods that can be used interchangeably, so an increase in the price of one leads to an increase in demand for the other</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Price elasticity of demand = The ratio of the percentage change in quantity demanded to the percentage change in price Coefficient of price elasticity of demand = The percentage change in demand for a commodity due to a given percentage change in the price Veblen goods = Goods which have elasticity greater than 0, consumers buy more if the price is higher Giffen goods = Goods which have elasticity greater than 0, consumers buy more if the price is higher</p> Signup and view all the answers

Match the following terms with their formulas:

<p>Initial price of the good demanded = $P$ Change in price = $\Delta P$ Initial quantity of the good demanded = $Q$ Change in quantity = $\Delta Q$</p> Signup and view all the answers

Match the following percentage changes with their corresponding values:

<p>Fall in quantity demanded = 10% Rise in price = 5% Elasticity = -2 Price increase = $5</p> Signup and view all the answers

Match the following terms with their descriptions:

<p>Elastic demand = A good is said to have this when its elasticity is greater than 1 Inelastic demand = A good is said to have this when its elasticity is less than 1 Law of demand = Quantity demanded falls when price rises Elasticity of two = Refers to an elasticity of -2</p> Signup and view all the answers

Match the following terms with their corresponding explanations:

<p>Negative price elasticity of demand = The usual state because quantity demanded falls when price rises Rare classes of goods = Veblen and Giffen goods Price elasticity of demand in absolute value terms = Often referred to as a positive value Common source of confusion for students = Economists leaving off the word 'negative' or the minus sign when referring to the price elasticity of demand</p> Signup and view all the answers

Match the following scenarios with their resulting elasticity:

<p>Quantity demanded falls 20 tons from an initial 200 tons after the price rises $5 from an initial price of $100 = Elasticity is -2 Quantity demanded falls 10% and the price has risen 5% = Elasticity is -2 Price rises $5 from an initial price of $100 and the quantity demanded has fallen 10% = Elasticity is -2 The price has risen 5% and the quantity demanded has fallen 20 tons from an initial 200 tons = Elasticity is -2</p> Signup and view all the answers

Match the following goods with their price elasticity of demand:

<p>Yachts = Elasticity of two, meaning the elasticity is -2 Veblen goods = Elasticity greater than 0 Giffen goods = Elasticity greater than 0 Majority of goods and services = Negative price elasticity of demand</p> Signup and view all the answers

Match the following terms with their descriptions:

<p>Price elasticity of demand = Percentage change in demand for a commodity due to a given percentage change in the price Veblen goods = Consumers buy more if the price is higher Giffen goods = Consumers buy more if the price is higher Elastic demand = Elasticity greater than 1</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Price elasticity of demand = The ratio of the percentage change in quantity demanded to the percentage change in price Coefficient of price elasticity of demand = The percentage change in demand for a commodity due to a given percentage change in the price Veblen goods = Goods which have elasticity greater than 0, consumers buy more if the price is higher Giffen goods = Goods which have elasticity greater than 0, consumers buy more if the price is higher</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Price elasticity of demand = Variation in demand in response to a variation in price Veblen goods = Goods which have elasticity greater than 0 Elastic demand = A good is said to have elastic demand if its elasticity is greater than 1 Inelastic demand = A good is said to have inelastic demand if its elasticity is less than 1</p> Signup and view all the answers

Match the following terms with their corresponding formulas or representations:

<p>Initial price of the good demanded = $P$ How much the price of the good changed = $\Delta P$ Initial quantity of the good demanded = $Q$ How much the quantity demanded changed = $\Delta Q$</p> Signup and view all the answers

Match the following terms with their meanings in the context of price elasticity of demand:

<p>Percentage change in demand = Change in demand for a commodity due to a given percentage change in the price Negative price elasticity of demand = Quantity demanded falls when price rises Absolute value of price elasticity of demand = Price elasticity of demand as a positive value Giffen goods = Goods which have elasticity greater than 0</p> Signup and view all the answers

Match the following terms with their descriptions in the context of price elasticity:

<p>Elasticity of two = The price elasticity demand is -2 Price rise = Increase in the price of a commodity Quantity demanded falls = Reduction in the demand of a commodity due to price rise Yachts = An example of a good with an elasticity of two</p> Signup and view all the answers

Match the following percentage changes with their corresponding effects:

<p>20 tons fall from initial 200 tons = 10% fall in quantity demanded $5 rise from initial price of $100 = 5% rise in price Elasticity of (-10%)/(+5%) = -2 Elasticity greater than 0 = Consumers buy more if the price is higher</p> Signup and view all the answers

Match the following terms with their definitions in the context of price elasticity of demand:

<p>Price elasticity of demand = The ratio of the percentage change in quantity demanded to the percentage change in price Law of demand = Quantity demanded falls when price rises Inelastic demand = When the elasticity of a good is less than 1 Elastic demand = When the elasticity of a good is greater than 1</p> Signup and view all the answers

Match the following terms with their definitions in the context of price changes:

<p>Price rise = An increase in the price of a commodity Quantity demanded = The amount of a good that buyers are willing and able to purchase Price elasticity of demand = A measure of the responsiveness of quantity demanded to a change in price Elasticity = A measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants</p> Signup and view all the answers

Match the following terms to their corresponding examples:

<p>Price elasticity of demand = If the quantity demanded falls 20 tons from an initial 200 tons after the price rises $5 from an initial price of $100 Negative price elasticity of demand = Quantity demanded falls when price rises Veblen goods = Goods which have elasticity greater than 0, consumers buy more if the price is higher Elastic demand = Yachts have an elasticity of two, meaning the elasticity is -2</p> Signup and view all the answers

Match the following terms with their meanings in the context of price elasticity of demand:

<p>Percentage change in price = How much the price of a good changed as a percentage of the initial price Percentage change in quantity demanded = How much the quantity demanded of a good changed as a percentage of the initial quantity demanded Price elasticity of demand = The ratio of the percentage change in quantity demanded to the percentage change in price Elastic demand = A situation where the elasticity of a good is greater than 1</p> Signup and view all the answers

Match the following terms with their definitions in the context of price elasticity:

<p>Price Elasticity = Shows how responsive customer demand is for a product based on its price Elastic = Sensitive to fluctuations in price Inelastic = Largely ambivalent about price changes Substitutes = Alternative products or services that can be used in place of another</p> Signup and view all the answers

Match the examples with the type of price sensitivity:

<p>Entertainment services = Elastic Beef = Elastic Luxury goods = Inelastic Staple food items = Inelastic</p> Signup and view all the answers

Match the following terms with their definitions in the context of price changes:

<p>Price Increase = A rise in the cost of a product or service Price Decrease = A reduction in the cost of a product or service Demand = The desire of consumers to purchase a product or service Supply = The total amount of a product or service available for purchase</p> Signup and view all the answers

Match the following scenarios with the expected consumer response:

<p>The price of a luxury car increases significantly = Demand decreases The price of a basic necessity like rice decreases slightly = Demand remains relatively stable The price of a popular brand of jeans decreases = Demand increases The price of a generic brand of jeans increases = Demand decreases</p> Signup and view all the answers

Match the following terms with their definitions in the context of marketing and pricing:

<p>Pricing = Determining the amount a customer pays for a product or service Marketing = Promoting and selling products or services Price Elasticity = A measure of the responsiveness of demand to changes in price Demand = The quantity of a product or service that consumers are willing and able to purchase</p> Signup and view all the answers

Match the following terms with their definitions in the context of price elasticity:

<p>Elastic Demand = Demand that is very sensitive to a change in price Inelastic Demand = Demand that is not very sensitive to a change in price Unit Elastic Demand = When the percentage change in quantity demanded is the same as the percentage change in price Perfectly Inelastic Demand = When the quantity demanded does not change as price changes</p> Signup and view all the answers

Match the following terms with their definitions in the context of price elasticity:

<p>Substitute Goods = Goods that can be used in place of one another Complementary Goods = Goods that are used together Normal Goods = Goods for which demand increases as income increases Inferior Goods = Goods for which demand decreases as income increases</p> Signup and view all the answers

Match the following terms to their definitions in the context of price elasticity:

<p>Price elasticity of demand = A measure of how sensitive the quantity demanded is to its price Elastic demand = A situation where the elasticity is greater than one Inelastic demand = A situation where the elasticity is less than one in absolute value Veblen and Giffen goods = Two classes of goods which have positive elasticity, rare exceptions to the law of demand</p> Signup and view all the answers

Match the following terms to their definitions in the context of marketing and pricing:

<p>In-market A/B test = A method to test product demand at different price points in the actual market Price point = The price at which a product is sold in the market Consumer response = The reaction of consumers to changes in price Consumer behavior = The study of consumers and the processes they use to choose, use (consume), and dispose of products and services</p> Signup and view all the answers

Match the following terms to their definitions in the context of economic theory:

<p>Revenue = The total amount of money a firm receives by selling goods or services Quantity demanded = The total amount of goods or services that are demanded at any given point in time Price rise = An increase in the price of a particular good or service Test markets = Geographical regions where a firm tests a new product or service</p> Signup and view all the answers

Match the following terms to their definitions in the context of price changes:

<p>Price elasticity = A measure of the responsiveness of the quantity demanded to a change in price Quantitative testing = A method of gathering data in numerical form Qualitative research = A method of gathering non-numerical data Incidence of a tax = The analysis of the effect of a particular tax on the distribution of economic welfare</p> Signup and view all the answers

Match the following terms to their definitions in the context of consumer behavior:

<p>Willingness to pay = The maximum amount a consumer is willing to give up in exchange for a good or service Survey responses = The answers given by respondents to a survey Market tests = Experiments conducted in a market to test responses to variations in marketing mix elements Consumer income changes = Variations in the amount of money that consumers have available to spend</p> Signup and view all the answers

Match the following terms to their definitions in the context of digital marketing:

<p>Digital context = The online environment where marketing takes place Product up at $10 = A scenario where a product is priced at $10 in an A/B test Change it to $2 = A scenario where the price of a product is reduced to $2 in an A/B test Consumer response = The reaction of consumers to changes in price in the digital context</p> Signup and view all the answers

Match the following terms to their definitions in the context of price elasticity of demand:

<p>Price rise = An increase in the price of a good or service Quantity demanded falls = A situation where the demand for a good or service decreases as a result of a price rise Elasticity is −2 = A situation where a one percent price rise leads to a two percent decline in quantity demanded Elasticity of 0 = A situation where consumption does not change at all, in spite of any price increases</p> Signup and view all the answers

Match the following descriptions with their corresponding elasticity zones:

<p>A product is perceived as a commodity by consumers = Highly elastic A product has unique and sustainable value for customers = Relatively inelastic Consumer demand changes significantly with price changes = Highly elastic Consumer demand doesn't change significantly with price changes = Relatively inelastic</p> Signup and view all the answers

Match the following factors with their impact on price elasticity:

<p>The type of product you’re selling = Can affect the elasticity The income of your target consumers = Can affect the elasticity The health of the economy = Can affect the elasticity What your competitors are doing = Can affect the elasticity</p> Signup and view all the answers

Match the following concepts with their descriptions:

<p>Elasticity = A quantitative concept to measure the sensitivity of demand to price changes Sensitivity = A qualitative concept related to how demand responds to price changes Price Elasticity of Demand = A measure of how much the quantity demanded of a good responds to a change in the price of that good Absolute value of elasticity = It’s the magnitude of distance from zero that matters in price elasticity</p> Signup and view all the answers

Match the terms with their descriptions in the context of price elasticity:

<p>Percentage decrease in demand = The change in quantity sold due to a price change Price Elasticity of Demand = A measure of how much the quantity demanded of a good responds to a change in the price of that good Elastic = Describes a product or service's demand that is very responsive to price changes Inelastic = Describes a product or service's demand that is not very responsive to price changes</p> Signup and view all the answers

Match the following phrases with their corresponding meanings in the context of price elasticity:

<p>The higher the absolute value of the number, the more sensitive customers are to price changes = High elasticity The actual number is less important than knowing which zone your product falls within = Importance of understanding the relation between product and price elasticity Your product may become more elastic if a competitor starts offering compelling substitutes = Elasticity can increase due to competition It’s an important metric to watch because your product may become more elastic if consumers’ incomes go down = Elasticity can increase due to changes in consumer income</p> Signup and view all the answers

Match the following terms with their definitions in the context of price elasticity:

<p>Elasticity = A measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants Price Elasticity of Demand = A measure of how much the quantity demanded of a good responds to a change in the price of that good Inelastic = Describes a product or service's demand that is not very responsive to price changes Elastic = Describes a product or service's demand that is very responsive to price changes</p> Signup and view all the answers

Match the following statements with their corresponding interpretations in the context of price elasticity:

<p>If my product is highly elastic, it is being perceived as a commodity by consumers = The product lacks differentiation A marketer’s goal is to move his or her products from relatively elastic to relatively inelastic = Marketers aim for their products to have unique and sustainable value Your product may become more elastic if a competitor starts offering compelling substitutes = Competition can increase a product's price elasticity Your product may become more elastic if consumers’ incomes go down = Changes in consumer income can increase a product's price elasticity</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Price elasticity of demand = The ratio of the percentage change in quantity demanded to the percentage change in price of a particular commodity Veblen goods = Goods which have elasticity greater than 0, meaning consumers buy more if the price is higher Giffen goods = Goods which have elasticity greater than 0, meaning consumers buy more if the price is higher Elastic demand = A good is said to have elastic demand if its elasticity is greater than 1</p> Signup and view all the answers

Match the following formulas with their corresponding terms:

<p>$\frac{-% \Delta Q}{% \Delta P}$ = Price elasticity of demand $\frac{-10%}{+5%}$ = Elasticity calculation example $\Delta P$ = Change in price $\Delta Q$ = Change in quantity</p> Signup and view all the answers

Match the following percentages with their corresponding terms:

<p>$-10%$ = Percentage change in quantity demanded in the example $+5%$ = Percentage change in price in the example $&gt; 1$ = Elastic demand $&lt; 1$ = Inelastic demand</p> Signup and view all the answers

Match the following terms with their descriptions:

<p>Price elasticity of demand = Normally negative because quantity demanded falls when price rises Veblen goods = Rare class of goods with positive price elasticity of demand Giffen goods = Rare class of goods with positive price elasticity of demand Elastic demand = When a good's demand changes significantly with changes in price</p> Signup and view all the answers

Match the following terms with their characteristics:

<p>Price elasticity of demand = Usually negative, but can be positive for Veblen and Giffen goods Veblen goods = Goods where an increase in price can lead to an increase in demand Giffen goods = Goods where an increase in price can lead to an increase in demand Elastic demand = Characteristic of goods where the quantity demanded changes more than proportionally to a change in price</p> Signup and view all the answers

Match the following terms with their corresponding quantities:

<p>Price elasticity of demand = Change in demand for a commodity due to a given change in the price $P$ = Initial price of the good demanded $\Delta P$ = How much the price changed $\Delta Q$ = How much the quantity demanded changed</p> Signup and view all the answers

Match the following terms with their corresponding definitions:

<p>Law of demand = Quantity demanded falls when price rises Elastic demand = A good's demand changes significantly with changes in price Inelastic demand = A good's demand changes less than proportionally with changes in price Elasticity = Measure of how much one economic variable responds to changes in another economic variable</p> Signup and view all the answers

Match the following terms with their corresponding explanations:

<p>Elasticity of -2 = Quantity demanded falls 10% and the price rises 5% Veblen goods = Goods that defy the law of demand Giffen goods = Goods that defy the law of demand Elastic demand = When the percentage change in quantity demanded is greater than the percentage change in price</p> Signup and view all the answers

Match the following terms with their corresponding examples:

<p>Price elasticity of demand = If the quantity demanded falls 20 tons from an initial 200 tons after the price rises $5 from an initial price of $100 Elasticity of -2 = Quantity demanded has fallen 10% and the price has risen 5% Yachts = Have an elasticity of two Elastic demand = When a 1% decrease in price leads to more than a 1% increase in quantity demanded</p> Signup and view all the answers

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