question

The price elasticity of demand for a good with a vertical demand curve is:

answer

perfectly inelastic.

question

If an item is a necessity rather than a luxury, its demand curve will be:

answer

relatively steep.

question

When the absolute value of the price elasticity of demand is less than 1, demand is:

answer

inelastic.

question

When the absolute value of the price elasticity of demand is greater than 1, demand is:

answer

elastic.

question

Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true?

answer

Mary has an inelastic demand for avocados.

question

The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____.

answer

-1.33; complements

question

When the absolute value of the price elasticity of demand is infinite, demand is:

answer

perfectly elastic.

question

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs?

answer

2.7

question

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____.

answer

2; substitutes

question

You are given data on four products — toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand?

answer

shampoo

question

Suppose the price of gasoline rises. As time passes, people adjust to the higher price, and the demand for gasoline becomes:

answer

more elastic.

question

If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is:

answer

0.5.

question

The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____.

answer

0.4; inelastic

question

The cross-price elasticity of demand measures how responsive the:

answer

demand for one good is to a change in the price of another good.

question

Taking the absolute value of the income elasticity of demand is incorrect because it would:

answer

remove the ability to tell whether the product is an inferior good or a normal good.

question

The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk?

answer

0.67

question

Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____.

answer

infinity; perfectly elastic

question

If demand is _____, a higher price yields _____ total revenue.

answer

inelastic; higher

The price is based on these factors:

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