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Economics Test 2 – Questions & Solutions (Rated A+)
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Economics Test 2 – Questions & Solutions (Rated A+)If the seller raises the price from $5 to $10, which of the following results
would allow the seller to determine the elasticity of demand for the good?
Correct Ans - The resulting percentage change in quantity demanded
The resulting change in revenue (in dollars)
If price rises by 10 percent, and quantity demanded falls by 2 percent
Correct Ans - demand for this good is inelastic
If price falls by 5 percent, and quantity demanded rises by 4 percent
Correct Ans - demand for this good is inelastic
If price falls by 6 percent, and quantity demanded does not change
Correct Ans - demand for this good is perfectly inelastic
If price rises by 2 percent, and quantity demanded falls by 1 percent
Correct Ans - demand for this good is inelastic
The price elasticity of demand is the Correct Ans - percentage
change in quantity demanded divided by the percentage change in price
The value of the price elasticity varies along... Correct Ans - a linear
demand curve
The slope of a demand curve is the Correct Ans - absolute change in
the variable on the vertical axis (price) divided by the absolute change in
the variable on the horizontal axis (quantity)
The value of the slope remains constant along a Correct Ans - linear
demand curve
elasticity of demand and the slope of the demand curve are Correct Ans
- not the same
Suppose the current price of gasoline at the pump is $4 per gallon and that
1 million gallons are sold per day. A politician proposes to add a $1 tax to
the price of a gallon of gasoline. She says the tax will generate $1 million in
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