Let us assume that there is a company that supplies vending machines. 3. Answer to Above Question. Question: 2. Free download in PDF Demand and Supply Multiple Choice Questions & Answers for competitive exams. Demand is inelastic and farmers’ total revenue will increase. B)the difference between one price and another. economics questions and answers; 2. Practice Questions and Answers from Lesson I -4: Demand and Supply 1 Practice Questions and Answers from Lesson I -4: Demand and Supply The following questions practice these skills: Describe when demand or supply increases (shifts right) or decreases (shifts left). It is assumed that the consumer’s income, tastes, and prices of all other goods are steady. Price Elasticity of Demand It is the ratio between percentage change in quantity demanded and percentage change in own price of the commodity. This is the case of luxuries or goods with several close substitutes. The current toll for the use of highway is $250. Write a short note on pure, perfect, monopolistic, oligopoly competition. If 100 units of product K are sold at a unit price of $10 and 75 units of product K are sold at a unit price of $15, one can conclude that in this price range: A) demand … Short answer and numeric questions Percentage change in price Percentage change in quantity demanded Price elasticity of demand A 5 10 ____ B 8 4 ____ C 3 0 ____ D 6 6 ____ E 1 8 ____ Additional Exercises (also in MyEconLab Test A) CHECKPOINT 5.2 Define, explain the factors that influence, and calculate the price elasticity of supply. Answer key Cross_Price_Elasticity_Key.pdf. Elasticity of demand measures the degree of responsiveness of quantity demanded of a commodity to a change in one of the variables affecting demand (i.e., to a change in any one of the demand determinants). C)the slope of the supply curve. To answer problem 4, you need also to use the fact that revenue is equal to price times quantity. Some Estimated Price Elasticities of Demand Good Price elasticity Inelastic demand Eggs 0.1 Beef 0.4 Stationery 0.5 Gasoline 0.5 Elastic demand Housing 1.2 Restaurant meals 2.3 Airline travel 2.4 Foreign travel 4.1 Price elasticity of demand < 1 Price elasticity of demand > 1 The estimate of demand elasticity could have been: .5 .25 .75 -.75 1.75 . 5.1 THE PRICE ELASTICITY OF DEMAND Addiction and Elasticity Nonusers’ demand for addictive substances is elastic. Identify a competitive equilibrium of demand and supply. To answer problem 5, it is useful to notice that Equation (1) can be rearranged to read Ed = µ q0 ¡q p0 ¡p ¶ £ µ p q ¶: (2) Along a straight line, the ratio q0 ¡q p0 ¡p is constant. J Gregory . Answers to Review Questions 1. Because $1.50 and 2,000 are the initial price and quantity, put $1.50 into P 0 and 2,000 into Q 0.And because $1.00 and 4,000 are the new price and quantity, put $1.00 into P 1 and 4,000 into Q 1.. Work out the expression on the top of the formula. C. 1.5. In the case of a straight line demand curve meeting the two axes, the price-elasticity of demand at the mid-point of the line would be : A. Questions and Answers 1. Choose the one alternative that best completes the statement or answers the question. A decrease in demand for guitar strings will lead to a decrease in the equilibrium price of guitar strings. 0. Share: Share on Facebook Share on Twitter Share on Linkedin Share on Google Share by email. An answer key document is also available. Exercise 6 Solution Chapter 6 Elasticity: The Responsiveness of Demand and Supply 6.1 The Price Elasticity of Demand and Its Measurement Professionals, Teachers, Students and Kids Trivia Quizzes to test your knowledge on the subject. 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