Question

13. If the quantity of a good sold varies greatly from small changes in the price, we say that good is: A) highly inelastic. B) unitary elastic. C) not elastic. D) highly elastic. 14. A product's price changes from $2 to $6 and its quantity demanded changes from 10 to 4 units. This is an example of price: A) inelastic demand. B) elastic demand. C) unitarily elastic demand. D) inelastic supply. 13. Which of the following is a possible measurement of inelastic demand? A) B) D) 1.0 2.3 1.5 C) 0.7 16. If the price of apples increases by 10% and that causes sales to drop by 5%, the elasticity of demand for apples is: D) 2. A) 0. C) 1. B) 0.5.

Answer 1

13. If the quantity of a good sold varies greatly from small changes in the price, we say that the good is highly elastic.

Answer: option D

14. New price (P2) = $6 and initial price (P1) = $2. New Quantity demanded (Q2) = 4 and initial quantity demanded (Q1) = 10.

Using midpoint method, price elasticity of demand = [(Q2-Q1)/{(Q2+ Q1)/2}] / [(P2 - P1)/{(P2 + P1)/2}]= (-6/7)/(4/4) = -6/7 = -0.86

The absolute value of elasticity is less than 1 means demand is price inelastic.

Answer: option A

15. 0.7 is a possible measurement of inelastic demand because 0.7 is less than 1.

Answer: option C

16. Price elasticity of demand = (% change in Quantity demanded/% change in price) = (5/10) = 0.5

Answer: option B