17 Questions
Why is vanilla ice cream more elastic than food?
Because it's a luxury
What happens to the quantity demanded of a good when the price elasticity of demand is high?
It responds substantially to changes in price
What is the main factor that determines the price elasticity of demand over different time horizons?
Time horizon
What type of goods tend to have more elastic demand?
Luxuries
What is the meaning of a unit elastic demand?
When the elasticity of demand is equal to one
Which of the following statements about elastic demand is true?
Elastic demand means that the quantity demanded changes proportionately more than the price.
What is the main difference between necessities and luxuries in terms of price elasticity of demand?
Necessities have inelastic demand, while luxuries have elastic demand.
Which of the following goods would likely have a more elastic demand?
Butter
What happens to the demand curve when the price elasticity of demand is perfectly elastic?
The demand curve becomes horizontal.
Which of the following factors determines the elasticity of demand?
Availability of close substitutes
What is the term for a market with a high degree of elasticity of demand?
Narrowly defined market
If a product is considered a necessity, its demand is likely to be:
inelastic
What is the formula for computing price elasticity of demand using the percentage method?
%ΔQ / %ΔP
When demand is inelastic, an increase in price will lead to an increase in:
total revenue
What is the formula for the midpoint method of measuring elasticity?
(Q2 - Q1) / (Q1 + Q2) * (P2 - P1) / (P1 + P2)
What does income elasticity of demand measure?
how the quantity demanded changes as consumer income changes
What is the term for the responsiveness of the quantity supplied of one good to a change in the price of another good?
cross-price elasticity
Understand how changes in price affect the demand for a product. Learn about different types of demand curves, including inelastic, elastic, and unit elastic, and discover the determinants of price elasticity.
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