Question

Principles of Economics Multiple choice short answer plz

15. Goods with many close substitutes tend to have a more elastic demands b. less elastic demands c price elasticities of demand that are unit elastic d. income elasticities of demand that are negative. 16. If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a a. 0.4 percent decrease in the quantity demanded. b. 2.5 percent decrease in the quantity demanded c. 4 percent decrease in the quantity demanded. d. 40 percent decrease in the quantity demanded. 17. If demand is price inelastic, then when price rises a. total revenue will fall b. total revenue will rise C. total revenue will remain unchanged total revenue may rise, fall, or remain unchanged. the change in total revenue with certainty. d. More information is need to determine The price elasticity of supply measures how responsive a. equilibrium price is to equilibrium quantity b. sellers are to a change in buyers' income. c. sellers are to a change in price d. consumers are to the number of substitutes 18. 19. If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is a. 0.63, and supply is elastic b. 0.63, and supply is inelastic. c. 1.60, and supply is elastic d. 1.60, and supply is inelastic. 20. The income elasticity of demand for caviar tends to be a. b. c. d. high because caviar is relatively expensive. low because caviar is packaged in small containers. high because buyers generally feel that they can do without it. low because it is almost always in short supply.

Answer 1

15. GOOD WITH MORE SUBSTITUTES TEND TO HAVE HIGHER ELASTICITY OF DEMAND, BECAUSE EVEN IF PRICE CHANGES BY A SMALL AMOUNT USERS CAN EASILY SHIFT TO CHEAPER SUBSTITUTES AND SAVE MONEY

16 IF e= 4 %change in price= 10%

elasticity=(%change in quantity demanded/%change in price)

4= %change in quantity demanded/10

%change in quantity demanded=40% decrease

17. demand is inelastic, price rises, TOTAL REVENUE WILL RISE because quantity would not fall much due to inelastic demand. change is price would be higher than change in quantity.

19. elasticity of supply =(%change in quantity supplied/%change in price)

= 40/25= 1.6 (elastic)

18. elasticity of supply shows how responsive seller are to the change in price.   elasticity of supply =(%change in quantity supplied/%change in price)

20. income elasticity for caviar is high because caviar is relatively expensive.

elasticity of income =(%change in quantity demanded/%change in income)