If – given consumer preferences – a certain good has many close substitutes available, then:Ī) The demand for that good will be relatively inelastic, compared to goods for which there are few close substitutes.ī) The supply of that good will be relatively inelastic, compared to goods for which there are few close substitutes.Ĭ) The demand for that good will be relatively elastic, compared to goods for which there are few close substitutes.ĭ) The supply of that good will be relatively elastic, compared to goods for which there are few close substitutes.Ĥ. If a demand curve is VERTICAL, then own-price elasticity of demand for this good is equal to:ģ. Which of the following does NOT affect the magnitude of own-price elasticity of demand?Ī) The length of the time horizon over which we are looking at the change in consumer behaviour.ī) The availability (or lack thereof) of close substitutes for the good in question.Ĭ) The amount by which quantity supplied will change as price changes.ĭ) All of the above affect the own-price elasticity of demand.Ģ. Consider the demand curve drawn below.Īt which of the following prices and quantities is revenue maximized?ġ. Which of the following could be the (absolute) value for the own-price elasticity of demand, in the price range considered?ħ. Suppose that, if the price of a good falls from $10 to $8, total expenditure on the good decreases. Demand is unit elastic at a price of $30, and inelastic at all prices less than $30. Demand is unit elastic at a price of $30, and elastic at all prices greater than $30. Which of the following statements correctly describes own-price elasticity of demand, for this particular demand curve? Note that P × Q equals $900 at every point on this demand curve. Use the demand diagram below to answer this question. If doing so results in an increase in revenues raised, which of the following could be the value of the own-price elasticity of demand for ferry rides?ĥ. Suppose BC Ferries is considering an increase in ferry fares. Which of the following statements about the relationship between the price elasticity of demand and revenue is TRUE?Ī) If demand is price inelastic, then increasing price will decrease revenue.ī) If demand is price elastic, then decreasing price will increase revenue.Ĭ) If demand is perfectly inelastic, then revenue is the same at any price.ĭ) Elasticity is constant along a linear demand curve and so too is revenue.Ĥ. What is the own-price elasticity of demand as price decreases from $8 per unit to $6 per unit? Use the mid-point formula in your calculation.ģ. Use the demand curve diagram below to answer the following TWO questions.ġ. If goods X and Y are COMPLEMENTS, the which of the following could be the value of cross price elasticity of demand?ĭ) All of the above could be the value of cross price elasticity of demand. If pizza is a normal good, then which of the following could be the value of income elasticity of demand?Ĩ. If goods X and Y are SUBSTITUTES, then which of the following could be the value of the cross price elasticity of demand for good Y?ħ. What does (the absolute value of) own price elasticity of demand equal?Ħ. Suppose that a 10 increase in price results in a 50 percent decrease in quantity demanded. Which of the following is the correct interpretation of this number?Ī) A 1% increase in price will result in a 50% increase in quantity supplied.ī) A 1% increase in price will result in a 5% increase in quantity supplied.Ĭ) A 1% increase in price will result in a 2% increase in quantity supplied.ĭ) A 1% increase in price will result in a 0.5% increase in quantity supplied.ĥ. Suppose you are told that the own-price elasticity of supply equal 0.5. If own-price elasticity of demand equals 0.3 in absolute value, then what percentage change in price will result in a 6% decrease in quantity demanded?Ĥ. Own-price elasticity of demand is equal to:ģ. Suppose that a 2% increase in price results in a 6% decrease in quantity demanded. What is the own-price elasticity of demand as price increases from $2 per unit to $4 per unit? Use the mid-point formula in your calculation.Ģ. Use the demand curve diagram below to answer the following question. They are duplicates of the questions found in the Topic sub-sections. All the following questions are from previous exams for Economics 103.
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