Elasticities of Demand
191 questions· page 1 of 20
The diagram shows the impact on equilibrium due to an increase in the costs of production. The original price is $72. The price elasticity of demand is -2.0.
What is the new equilibrium price, P2?
Options
A $81.00
B $84.00
C $92.00
D $108.00
A decrease in the quantity demanded of a product results in a proportionate decrease in sales revenues.
What is true about its price elasticity of demand?
Options
A It is between zero and one.
B It is infinite.
C It is unitary.
D It is zero.
A government decides to raise most of its revenues from indirect taxes.
What would increase the effectiveness of this policy?
Options
A an increasing trend towards bartering of goods
B increasing interest rates on household savings
C increasing occurrence of informal markets in the economy
D placing taxes on goods and services which have a price-inelastic demand
When can a product be said to have a negative income elasticity of demand?
Options
A When it is a luxury good.
B When it is a necessity good.
C When it is a normal good.
D When it is an inferior good.
An indirect tax is imposed on good X.
Which situation is most likely to result in producers bearing a higher burden of the tax?
Options
A price elasticity of demand is elastic
B price elasticity of demand is inelastic
C price elasticity of supply is elastic
D price elasticity of supply is inelastic
What is true for income elasticity of demand but not for price elasticity of demand?
Options
A It helps firms differentiate between goods with elastic and inelastic demand.
B It helps firms differentiate between normal and inferior goods.
C It helps firms predict the changes in the quantity demanded.
D It helps firms predict the changes in sales revenues.
A survey into the market for good X found that it is an inferior good and a close substitute for good Y.
Which values for the income elasticity of demand for good X and its cross elasticity of demand with respect to the price of good Y would support this?
Options
| income elasticity of demand for good X | cross elasticity of demand for good X with respect to the price of good Y | |
|---|---|---|
| A | -1.2 | -0.9 |
| B | -1.2 | +0.9 |
| C | +1.2 | -0.9 |
| D | +1.2 | +0.9 |
Which statement is true if the income elasticity of demand for a good has a value of -0.2?
Options
A When income rises less of the good is bought.
B When income rises more of the good is bought.
C When price falls more of the good is bought.
D When price rises less of the good is bought.
The diagram shows the demand curve for a product.
What is the price at which the price elasticity of demand is unit elastic?
Options
A $0
B $50
C $100
D every price along the demand curve
Public transport in an economy has an income elasticity of demand of – 0.36.
What does this mean about public transport?
Options
A It is an inferior good.
B It is a necessity.
C It is a normal good.
D It has close substitutes.