Question

# Which of the following statements about the price elasticity of demand is correct?

Question 5

Which of the following statements about the price elasticity of demand is correct?

The absolute value of the elasticity of demand ranges from zero to one.

The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good.

Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Demand is more elastic in the long run than it is in the short run.

Question 6

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing

the percentage change in the price of Coca-Cola by the percentage change in the price of Pepsi-Cola.

the percentage change in the price of Pepsi-Cola by the percentage change in quantity demanded of Coca-Cola.

the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of Pepsi-Cola.

the percentage change in quantity demanded of Coca-Cola by the percentage change in the quantity demanded of Pepsi-Cola.

Question 7

Of the following, which is the best example of good with a perfectly inelastic demand?

a diabetic's demand for insulin

the demand for a college education by a student who has a full scholarship to an Ivy League school

the demand for tickets in New York City when the Mets or Yankees are in the World Series

the demand for gasoline

Question 8

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from

ticket sales

True

False

Solution.

5..............d

explanation:- demand is more elastic in the long run because in the long run, consumer may change his habbit and consumption pattern. In the short run he can't do so, his demand is inelastic.

6............c

explanation:- The cross price ep for coca cola = % change in the quantity demand of coca cola. ÷ %change in the price of Pepsi cola.

7...........a

explanation- insulin is a life saving drug, so even if its price increasicreases sharply, its quantity demand will remain the same.

8..........b (false)

explanation:- demand for ticket is elastic (e>1).so an increase in price of ticket in some proportion will decrease sales of ticket in larger proportion. So total revenue will decrease.

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