# Master Price Elasticity

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## 30 Questions

Macroeconomics

### What does the theory of the consumer in microeconomics deal with?

Consumption by utility-maximizing individuals

### What does the theory of the firm in microeconomics deal with?

Supply of goods and services by profit-maximizing firms

### What is the most important variable that affects the quantity of a good that consumers are willing to buy?

Price of the good

### What is the fundamental model of the private-enterprise economy?

Demand and supply model of the market

### Which factor is likely to make the own-price elasticity of demand greater for a good?

Having many close substitutes

### When faced with the same percentage increase in prices, consumers are more likely to cut back on which type of goods?

Non-discretionary goods

### Which characteristic is likely to result in a less elastic demand for a good?

Being seen as necessary instead of optional

### What is likely to be a complex result of various characteristics when it comes to elasticity?

The demand for a good

### Which term in Equation 6 remains constant along the entire demand curve?

$\frac{\Delta Q}{\Delta P}$

€1.48 per liter

### When is demand said to be unit elastic?

When the magnitude of the own-price elasticity coefficient is equal to negative one

### What is the interpretation of an elasticity coefficient of -1.28?

Demand is elastic

### What is the quantity demanded when the price is €1.48 per liter in our hypothetical example?

47.54 liters per month

### Which of the following is true about the demand function?

It captures all the influences on consumers' demand for a product or service.

### What does the negative sign on the coefficient of gasoline price in Equation 2 indicate?

As the price of gasoline increases, the quantity of gasoline consumed decreases.

### What is the dependent variable in Equation 2?

The quantity of gasoline demanded.

### What is the inverse demand function?

$Px = 8.92 - 0.156Qx_d$

### What does it mean for two goods to have a negative cross-price elasticity of demand?

They are complements.

### Which of the following is a drawback of using the coefficient on the price variable as a measure of sensitivity?

It is dependent on the units of measurement

### What is the formula for own-price elasticity of demand?

Epxd = %ΔQx_d / %ΔPx

### What does the slope of the demand curve represent?

The change in price divided by the change in quantity

Both A and B

### What does elasticity measure?

How sensitive one variable is to any other variable

### Which of the following is a characteristic that tends to be predictive of a good's elasticity of demand?

The portion of the typical budget that is spent on the good

### Which of the following is true about the demand curve facing a seller under conditions of perfect competition?

It is perfectly elastic

### Which of the following is true about the long-run elasticity of demand for most goods?

It is greater than the short-run elasticity of demand

### Which of the following is a characteristic that determines whether demand is highly elastic?

The presence of close substitutes for the good

### Which of the following goods is likely to have a less elastic demand?

Toothpaste

Test your understanding of price elasticity with this quiz. Explore how to algebraically expand Equation 5 and calculate the percentage change in variables. Gain a better understanding of price elasticity through practical examples.

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