Question

# If the supply curve is vertical, then supply is perfectly inelastic. A) True B) False If...

If the supply curve is vertical, then supply is perfectly inelastic.

A) True

B) False

If a \$5 decrease in the price of a good leads to a ten unit increase in quantity demanded, then demand must be elastic.

A) True

B) False

If the absolute value of the price elasticity of demand for peanuts is 2, then a 10 percent increase in the price of peanuts will lead to a 5 percent decrease in the quantity of peanuts demanded.

A) True

B) False

Q1
True
the supply curve is vertical at the fixed supply level so it is inelastic to the price change.
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Q2
false

the elasticity of demand =%change in quantity/%change in price
or
Elasticity of demand=(change in quantity/average quantity)/(change in price/average price)
by both the methods the proportional change is important not the absolute value, as the increase in absolute value may be less or more in proportion.

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Q3
false

the elasticity of demand =%change in quantity/%change in price
=(-5)/10
=-0.5
=0.5 ( absolute value)
it is not 2.

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