1. Which of the following examples shows a price elasticity of demand equal to 3?
a) None of the above.
b) When the price falls from $5 to $3, the quantity demanded increases from 1 unit to 7 units.
c) When the price falls from $5 to $3, the quantity demanded increases from 1 unit to 3 units.
d) When the price falls from $3 to $1, the quantity demanded increases from 7 units to 9 units.
e) When the price falls from $5 to $3, the quantity demanded increases from 1.5 units to 2.5 units.
2. Which of the following is a characteristic of an item for which price elasticity of demand is elastic?
a) A necessity for survival
b) A small number of competitors
c) Many substitutes
d) A short time period under consideration
e) A price that accounts for a small percentage of consumers' incomes
3. If a 10 % decrease in price leads to a 5 % increase in quantity demanded, then the price elasticity of demand is 2.
a) True
b) False