Question

1.Price elasticity of demand indicates the consumer response to changes in:

A. Quantity

B. Demand

C. Price

D. All of the above

2.If the price elasticity of demand for a product is −2, this means that, ceteris paribus, quantity demanded will increase by

A. 2 units for each $1 decrease in price.

B. 1 unit for each $2 decrease in price.

C. 2 percent for each 1 percent decrease in price.

D. 1 percent for each 2 percent decrease in price.

3.Which of the following causes demand on a product to be more elastic?

A. A great share of expenditure on the product in consumers’ budget.

B. Shorter periods of time to adjust to a change in the product price.

C. A steeper demand curve for a given price and quantity.

D. Fewer substitutes for the product.

4. Which of the following is the best reason why we pay a relatively low price for water

A. The supply of water is so great that we pay a low price with small demand.

B. Additional units of water are normally not worth much to us.

C. Water is abundant; the total utility we receive is relatively low.

D. Water is abundant; the marginal utility we receive is relatively high

Answer 1

1) price elasticity of demand measures the percentage change in the quantity demanded In response to percentage change in the price.

Therefore, price elasticity of demand indicates the consumer response to changes in Price.

Hence, option C is correct

2) if the price elasticity of demand for a product is -2, this means that ceteris paribus quantity demanded will increase by 2 percent for each one percent decrease in price.

Hence, option C is correct

3) if a greater share of Expenditure out of consumer's budget is incurred on the product, then this will cause the demand of the product to be more elastic.

Hence option A is correct

4) When supply of water is very large as compared to demand of water, the price paid by us will be low.

Therefore, the best reason why we pay relatively low price for water is the supply of water it's so great that we pay a low price with small demand.

Hence, option A is correct