2.7 Price Elasticity of Demand
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• Question 1
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Q. Demand is unit elastic if it is less than 1.0
True
False
• Question 2
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Q. Demand is almost always more elastic at higher prices and less elastic at lower prices.
True
False
• Question 3
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Q. Suppose that elasticity of demand of socks is 0.7.  If the price of socks is reduced by 10%, how will sales be effected?
sales will grow by more than 10%
Sales will grow by 10%
Sales will grow by less than 10%
Sales will decrease by 10%
• Question 4
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Q.

The formula for calculating price elasticity of demand is:

The % change in price over the % change in quantity demanded

The % change in quantity demanded over the % change in price

The change in price over the change in quantity demaned

The change in quantity demanded over the change in price

• Question 5
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Q.

The price elasticity of demand for tissues is 0.66. This means the demand for tissues is relatively

elastic

unit elastic

inelastic

really expensive

• Question 6
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Q.

The desire to have some good or service and the ability to pay for it

supply

equilibrium

demand

quantity demanded

• Question 7
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Q.

Which of these best describes the law of demand?

if prices go up, quantity demanded will fall and if prices go down, quantity demanded will go up

if prices go up, quantity demanded will also go up and if prices go down, quantity demanded will also go down

there is no law of demand, each situation is unique and demand and prices cannot be predicted

prices will go up for certain goods when quantity demanded goes up and vice versa

• Question 8
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Q.

A change in the price of a good causes people to buy more or less of an item. This best describes the concept of

the demand curve

change in quantity demanded

change in demand

elasticity

• Question 9
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Q.

Elasticity refers to

how producers of goods and services react to price changes

how consumers of goods and services react to price changes

how far a supply of scarce goods can be stretched

how often the price of a good or service changes when quantity demanded changes

• Question 10
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Q.

Water has seen an increase in demand 8% this summer, while the price has decreased 12%. The PED is:

1.5 inelastic

1.5 elastic

.67 inelastic

.67 elastic

• Question 11
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Q.

Wheat has seen a decrease in demand of 5%, while the price has increased 7%. The PED is:

1.4 inelastic

1.4 elastic

.71 inelastic

.71 elastic

• Question 12
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Q.

Demand is almost always more price elastic at higher prices and less price elastic at lower prices.