PART 3. Price Elasticity of Demand



1.When the price elasticity of demand for a good is greater than 1, we say that the demand is ____________________.Demand is said to be ____________________ when the elasticity of demand is less than ____________________

A inelastic, elastic, 1
B inelastic, elastic, -1
C elastic, inelastic, -1
D elastic, inelastic, 1

2. True or False, the steeper the demand curve, the less elastic the demand curve

A False
B True

3. We know that the demand for a good or service is inelastic if ____________________

A when price rises, quantity demanded falls
B when price rises, total revenue rises
C when price rises, quantity demanded rises
D when price rises, total revenue falls

4. When consumers only have a limited time period to respond to price changes, demand becomes

A more price elastic
B less price elastic
C unit elastic
D the time frame does not influence price elasticity of demand

5. Given that the market demand for heroin is inelastic, how will a reduction in market supply affect total revenue of those selling this drug (other things equal)?

A Total revenue will fall
B The final effect on total revenue cannot be predicted - it depends on how much the supply has fallen
C Total revenue will remain unchanged
D Total revenue will rise

6. The local multiplex cinema discovered that when it charged £5 for the afternoon matinee, it took in £450 per showing, but when it lowered the price to £3, it took in £500 per showing. This implied that the elasticity of demand for afternoon matinee movies is

A Price inelastic
B Unit elastic
C Price elastic
D Perfectly elastic

7. If the price elasticity of demand for beans is estimated to be -0.4, then a 20% increase in price will _______ the quantity demanded by ____ %

A decrease, 14%
B decrease, 8%
C increase, 16%
D increase, 8%

8. When the price of petrol rises 30%, the quantity of petrol purchased falls by 6%. The demand for petrol is _______________

A price inelastic
B perfectly elastic
C perfectly inelastic
D price elastic

9. The price elasticity of demand measures the responsiveness of quantity demanded for good X to ____________________

A quantity demanded
B a change in the output of good X
C quantity supplied
D a change in the price of good X

10. If you earn £50,000 a year and acquiring a cable TV service costs you £360 per year, your demand for cable television is likely to be

A perfectly elastic
B elastic
C inelastic
D perfectly inelastic



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