Question

MONTGOMERY COLLEOE Department of Business and Eoonomics Rockville Campas ECON 202 Test #2 Fall 2019 Professor Shah Mebrabi Name 1. The price elasticity of demand is a measure of the: A. Steepness or slope of a demand curve B. Absolute changes in quantity demanded and price C. Responsiveness of quantity demanded to a change in price D. Sensitivity of price to changes in demand 2. If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by: A. 20 percent B. 0.5 percent C. 5 percent D. 0.05 percent 3. Block's sells 500 bottles of perfume a month when the price is $7. A hnge increase in resource costs forces Block's to raise price to $9 and the firm only manages to sell 460 bottles of perfume. The price elasticity of demand is: A .33 and elastic B. 3.0 and elastic C. 33 and inelastic D. 3.0 and inelastic consup 25,Bow moch ld pr ve m dan oo क ND e3oroda o bmb D 0 Quantity O Quantity O Quantity (C) O Quantity (A) (D) (B) 4. Refer to the graphs above. Which one shows a situation where buyers are all willing to Py one uniform price for the product? Graph A . Graph B Graph C Graph D b

Answer 1

1. The price elasticity of demand is a measure of the responsiveness of quantity demanded to a change in price. It shows by how much quantity demanded will change as a change in price. Elasticity can not show the slope of the demand curve, neither can be absolute changes. Here we show the responsiveness, or elasticity.