2. The more time consumers have to react to a price change, the greater will be their price elasticity of demand.

• a. True
• b. False

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3. The income elasticity of demand for an economically inferior good is positive because, as income rises, demand for the good rises.

• a. True
• b. False

4. If household income increases 20% and household demand for potatoes declines 10%, the evidence shows that potatoes are a(n) _____.

• a. economically normal good
• b. economically inferior good
• c. luxury good
• d. price-elastic good

5. If household incomes decline during an economic downturn, and if demand for premium brands of orange juice fall as a result, these brands are economically normal goods.

• a. True
• b. False

6. The elasticity of a demand between any two points on a demand curve is measured as _____.

• a. % change in quantity demanded divided by % change in price
• b. the slope of the demand curve
• c. 1/slope of the demand curve
• d. change in price - change in quantity demanded

7. Elasticity in economics refers to a ratio of percentage changes in two related variables.

• a. True
• b. False

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8. If, other things being equal, the % change in P is 20% and the associated % change in Qs is 10%, what is the price elasticity of supply?

• a. -2.0
• b. -0.5
• c. 0.5
• d. 2.0

9. If price elasticity of demand equals 1.0, then for that range of demand a 10% price increase will cause _____.

• a. a 1% increase in total revenue
• b. a 10% increase in total revenue
• c. no change in total revenue
• d. a 10% decrease in total revenue

10. The price elasticity of demand equals the percentage change in buyers' quantity demanded divided by the percentage change in quantity supplied.

• a. True
• b. False

11. If the price elasticity of demand equals 1.0, then a price change will cause no change in total revenue.

• a. True
• b. False

12. (Qd is quantity demanded.) If the price elasticity of demand is inelastic, then a 10% decrease in price will cause _____.

• a. more than a 10% increase in Qd
• b. exactly a 10% increase in Qd
• c. less than a 10% increase in Qd
• d. no increase in Qd

13. A vertical demand curve is said to be _____.

• a. perfectly elastic
• b. unitary elastic
• c. constant in elasticity
• d. perfectly inelastic

14. If the price elasticity of demand is inelastic, then a 10% increase in price will cause more than a 10% increase in quantity demanded.

• a. True
• b. False

15. [P is price and Qd is quantity demanded.] Which of these measures the elasticity of a demand between any two points on a demand curve?

• a. (Qd2 - Qd1) / (P2 - P1)
• b. (Qd2 - Qd1) * (P2 - P1)
• c. (Qd2 + Qd1) / (P2 + P1)
• d. (Qd2 - Qd1) / (Qd2 + Qd1) divided by (P2 - P1) / (P2 + P1)

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16. A horizontal demand curve is said to be perfectly inelastic.

• a. True
• b. False

17. If price elasticity of demand equals 1.5, then we call this _____.

• a. perfectly inelastic demand
• b. inelastic demand
• c. unit elastic demand
• d. elastic demand

18. (Assume Qd is quantity demanded, and P is price.) The best way to calculate a price elasticity of demand is: (Qd2 - Qd1) / (P2 - P1).

• a. True
• b. False

19. If, other things being equal, the % change in P is -5% and the associated % change in Qd is 10%, what is the price elasticity of demand? Assume the minus sign matters.

• a. -2.0
• b. -0.5
• c. 0.5
• d. 2.0

20. Elastic demand means any value of elasticity less than 1.

• a. True
• b. False