Question

Hello, asking for some help on these 5 questions. Thank you!

1. Which of the following is true of a good with a perfectly elastic demand?

A. For a given price change, the percentage change in quantity demanded of the good will be less than the percentage change in price.

B. The quantity demanded of the good is completely unaffected by a price change.

C. Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.

D. The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward.

2. In case of a downward-sloping, linear demand curve, the price elasticity of demand for a good ________.

A. is equal to the slope between different points on the demand curve

B. is one between any two points on the curve

C. is zero between any two points on the curve

D. is different at different points on the curve

3. If the a price increase of 8% leads to a decrease in Qd of 2% for a good, then the price elasticity of demand for that good is?

A. 3

B. 4

C. 0.25

D. 0.50

4. Luxury goods have an income elasticity ________.

A. less than zero

B. greater than one

C. equal to one

D. between zero and one

5. In a perfectly competitive market, ________.

A. bargaining over prices is a common phenomenon

B. there are restrictions on the entry of new firms

C. sellers produce identical goods

D. each seller charges a different price for its product

Answer 1

1) C

Perfectly elastic demand merchant means even a slight change in price changes quantity demanded by 100%

2) D

Elasticity is different along the demand curve.

3) C

Elasticity= 2/8= 0.25

4) B

Income elasticity of luxury goods is greater than 1.

5) C

There are identical goods in perfect competition.