ELASTICITY EXAM WITH QUESTIONS AND VERIFIED ANSWERS

ELASTICITY EXAM WITH QUESTIONS AND VERIFIED ANSWERS Because elasticity is a units-free measure of the responsiveness of the quantit y demanded of a good or service to a change in its price, _______= we can compare the responsiveness of the same good when quantity is measured in different units, or we can compare across different goods - ANSWER The elasticity of demand is a unit-free measure. Elasticity is a better measure than the slope for the responsiveness of the cha nge in quantity demanded to price changes, because the slope changes when the units measuring the quantity of the good are different. The value of elasticity is independent of the units used to measure the price and quantity of the good. So elasticity can be compared across the same good when the quantity is measured in different units, or it can be compared across different goods. The price elasticity of demand is a unit-free measure of the responsiveness of ______. the quantity demanded of a good to a change in its price when all other infl uences on buying plans remain the same - ANSWER When supply increases, the equilibrium price falls, and the equilibrium quantity increases. Elasticity is the measure that we use to see by how much the equilibrium price falls and by how much the equilibrium quantity increases. elasticity - ANSWER Price elasticity of demand = Percentage change in the quantity demanded divided by percentage change in the price. The fewer the substitutes for a good or service, the more ______ is the demand for it. The smaller the proportion of income spent on a good, the more ______ is t he demand for it. - ANSWER inelastic; inelastic The shorter the time that has elapsed since a price change, the more =inelastic is demand - ANSWER Demand for a luxury is more _ELASTIC_____ than demand for a necessity because a luxury has _MORE_____ substitutes. The total revenue test is a method of estimating the price elasticity of demand by observing the ______ that results from ______, when all other influences on the quantity sold remain the same. - ANSWER change in total revenue; a change in t he price Demand is elastic if a price ______ increases total revenue. Demand is inelastic if a price _________ increases total revenue. Demand is unit elastic if a price _____ leaves total revenue unchanged. - ANSWER CUT; RISE; CUT OR RISE The price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price. - ANSWER The price increases from $44 to $66 a box, which is an increase of $2. The average price is $55. W hat is the percentage change in the price? The quantity demanded decreases from 1 comma 0001,000 to 600600 boxes, which is a decrease of 400. The average quantity is 800800 boxes. What is the percen tage change in the quantity demanded? =DEMAND ELASTIC If the quantity of dental services demanded increases by 55 percent when the price of dental services falls by 10 percent, the demand for dental services is _______ =INELASTIC - ANSWER The price elasticity of demand is equal to the percentage change in the quantity demanded divided by the percentage change in price. When the price elasticity of demand is greater than 1, demand is elastic. When the price elasticity of demand is less than 1, demand is inelastic. And when the price elasticity of demand equals 1, demand is unit elastic. In this question, the percentage change in the quantity demanded is less th anless