Reference no: EM131169608

1) To measure the price elasticity of demand, economists calculate: How much price changes relative the change in the quantity demanded. The absolute value of the percentage change in quantity demanded relative to the absolute value of the percentage change in price. The absolute value of the percentage change in price relative to the absolute value of percentage change in quantity demanded. The absolute value of the change in quantity demanded relative to the absolute value of the change in price. The absolute value of the percentage change in quantity supplied relative to the absolute value of the percentage change in price. 2) If the demand for a good is inelastic, then: A rise in price will increase the total revenue of sellers. A fall in price will create a large increase in sellers' total revenue because the loss from lowering price will be small relative to the gain in quantity demanded. A change in price will always be greater in absolute terms than the quantity demanded. A change in quantity demanded will always greater in absolute terms than the price. A change in price will always be greater in absolute terms than the quantity demanded when price rises. 3) If the price of good falls by 10% and the quantity demand rises by 5%, then: Total revenue of the sellers will rise. Demand is elastic over this region of the demand curve. The loss to the sellers from the fall in price will be greater in absolute terms than the gain from the rise in quantity demanded. The law of demand does not hold in this example. Consumers do not benefit from consuming this good. 4) If price falls from $12 to $8 and the quantity demanded rises from 1,600 to 2,400, then: The demand curve over this region is inelastic and equal to .4. The demand curve over this region is elastic and equal to 2. Over this region of the demand curve total revenue is unchanged because the elasticity of demand is equal to 1. Over this region of the demand curve total revenue is falling because the price is falling in absolute terms more than the quantity is rising. Over this region of the demand curve total revenue is rising because the price is falling in absolute terms less than the quantity is rising. 5) If the price of a good rises by 10% and the quantity demanded falls by 20%, then: Demand is neither elastic nor inelastic over this region of the demand curve. Total revenue of the sellers will fall. Demand is inelastic over this region and total revenue will rise. Total revenue will be unchanged over this region of the demand curve. Demand is elastic over this region because the increase in price produces a relatively small percentage change in quantity demanded. 6) If price falls from $120 to $80 and the quantity demanded rises from 18,000 to 22,000, then: Demand for the good is elastic over this region of the demand curve and total revenue is rising. Demand for the good is unitary elastic over this region of the demand curve and total revenue is unchanged. Demand for the good is inelastic over this region of the demand curve and total revenue is rising. Demand for the good is inelastic over this region of the demand curve and total revenue is falling. Demand for the good is elastic over this region of the demand curve and total revenue is falling. 7) Demand for an item tends to be more price elastic if: There are few substitutes, the item is a small part of the consumer's budget, and the longer the time period the consumer has to adjust to the price change. There are many substitutes, the item is a small part of the consumer's budget, and the longer the time period the consumer has to adjust to the price change. There are many substitutes, the item is a large part of the consumer's budget, and the longer the time period the consumer has to adjust to the price change. There are many substitutes, the item is a large part of the consumer's budget, and the shorter the time period the consumer has to adjust to the price change. There are few substitutes, the item is a large part of the consumer's budget, and the shorter the time period the consumer has to adjust to the price change. 8) If demand for a good is elastic, then: A rise in its price will increase the total revenue of the sellers because the loss from increasing price would be greater than the gain. A fall in its price will increase the total revenue of the sellers because the loss from lowering price would be greater than the gain. A rise in its price will decrease the total revenue of the sellers because the gain from increasing its price would be greater than the loss. A fall in its price will increase the total revenue of the sellers because the loss from decreasing price would be smaller than the gain. A rise in its price will increase the total revenue of the sellers because the gain from increasing price would be greater than the loss. 9) If the price of a good falls by 10% and the quantity demanded rises by 10%, then: Demand is said to be elastic over this region of the demand curve. Demand is said to be inelastic over this region of the demand curve. The total revenue of the sellers will fall. The total revenue of the sellers will rise. Demand is neither elastic nor inelastic over this region of the demand curve.