Question

True/False Answer Following Questions.......16-. The demand for oil would become less elastic if the price of oil increases by significant amount for a long period of time. 17-. When demand is inelastic, total revenue goes down in proportion to a price increase. 18- Elasticity of demand is always negative. 19-. If the price of a good increases from $100 to $110 and quantity demanded decreases from 100 units to 90 units, the demand would be classified as unit elastic. 20- The elasticity of supply measures how sensitive the supply curve is to a change in price.

Answer 1

Answer : 16) False. Because in long run time period demand is more elastic than the short run time period as in long run all things are variable.

17 ) False. Because when demand is inelastic then there is no matter if price rise or not. This means in case of inelastic demand if price rise then total revenue increase.

18) True. Because there is an inverse relationship between price and quantity demanded. If price rise then demand decrease and if price fall then demand increase. Therefore, here exists negative elasticity.

19) True . In case of unit elasticity if price rise by 1% then demand decrease by 1% and vise versa. This means there is equal proportion change in price and quantity demanded.

20) True. Because if price rise then supply increase which shift the supply curve to rightward. If price fall then supply decrease which shift the supply curve to leftward.