Write the correct answer (only) on the space before each number.

_____1- Price elasticity of demand shows how:

A) Quantity demanded responds to changes in the price of other goods.

B) Price responds to quantity changes.

C) Quantity demanded responds to price changes.

D) To compute the slope of the demand curve

_____2- The price elasticity of demand is defined as the:

A) Unit change in price divided by the unit change in quantity demanded.

B) Percentage change in quantity demanded divided by the percentage change in price.

C) Percentage change in quantity demanded times the percentage change in price.

D) Unit change in quantity demanded times the unit change in price.

_____ 3. When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information, the demand for bubble gum is

A)	elastic. B) inelastic C) unitary D) perfectly inelastic

_____ 4. Demand is said to be inelastic if the

A)	quantity demanded changes proportionately more than price.
B)	price changes proportionately more than income.
C)	quantity demanded changes proportionately less than price.
D)	quantity demanded changes proportionately the same as price.

_____ 5. The flatter the demand curve through a given point, the

A)	greater the price elasticity of demand.
B)	smaller the price elasticity of demand.
C)	closer the price elasticity of demand will be to the slope of the curve.
D)	more equal the price elasticity of demand will be to the slope of the curve.

_____ 6. A perfectly elastic demand implies that

A)	buyers will not respond to any change in price.
B)	any rise in price above that represented by the demand curve will result in no output demanded.
C)	price and quantity demanded respond proportionally.
D)	price will rise by an infinite amount when there is a change in quantity demanded.

_____ 7. A perfectly inelastic demand curve will be

A)	Negatively sloped, because buyers decrease their purchases when the price rises.
B)	vertical, because buyers purchase the same amount whether the price rises or falls.
C)	positively sloped, because buyers respond by increasing their purchases when price rises.
D)	Horizontal, because buyers increase their purchases by huge amounts with slight changes in price.

____ 8. Suppose that 50 candy bars are demanded at a particular price. If the price of candy bars rises by 4 percent, the number of candy bars demanded falls to 46 candy bars. This means that the

A)	demand for candy bars in this price range is elastic.
B)	demand for candy bars in this price range is inelastic.
C)	price elasticity of demand for candy bars is 0.
D)	demand for candy bars is unit elastic.

____ 9. Suppose a university raises registration fee by 4 percent and as a result the enrollment of students decreases by 2 percent. The value of the price elasticity of demand is:

A)	0.50
B)	2.0
C)	8.0
D)	6.0

_____ 10. If the price elasticity of demand is -2.0, and a firm raises its price by 10 percent, the quantity sold by the firm will:

A) increase by 10 percent

B) decrease by 20 percent

C) decrease by 10 percent

D) increase by 20 percent

II. Compute for the price elasticity of demand given the following table. Write the resulting elasticity. Show computations at the back

Product	Price	Quantity Demanded	Quantity Supplied
A	0.50	1	30
B	0.45	2	25
C	0.40	4	20
D	0.35	6	16
E	0.30	9	12
F	0.25	12	9
G	0.20	16	6
H	0.15	20	4

1- Products A and B for price elasticity of supply 2- Products G and H for price elasticity of demand

Solution/Answer: _____________________ Solution/Answer: _____________________

Solutions:

_____2- Suppose the quantity demanded of cars falls from 5.0 million to 4.0 million as a result of an average price

increase from $15,000 to $20,000 per vehicle. The price elasticity of demand is:

_____ 3. Suppose the price of clair is reduced from $1.45 to $1.25 and, as a result, the quantity of Eclair demanded increases from 2,000 to 2,200. The price elasticity of demand for clair in the given price range is:

Solutions:

_____4. If the price elasticity of demand for a good is 1.65, then a 3 percent decrease in price results in a:

Solutions:

_____ 5. When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. What is the price elasticity of demand? What is the type of elasticity?

Solutions: