From the following quotations, what, if anything, can you conclude about elasticity of demand?
a. "Good weather resulted in record wheat harvests and sent wheat prices tumbling. The result has been disastrous for many wheat farmers."
A.
The demand has unit elasticity.
B.
The demand is inelastic.
C.
The demand is elastic.
D.
This quotation tells nothing about the elasticity of demand.
b. "Ridership always went up when bus fares came down, but the increased patronage never was enough to prevent a decrease in overall revenue."
A.
The demand is elastic.
B.
The demand has unit elasticity.
C.
The demand is inelastic.
D.
This quotation tells nothing about the elasticity of demand.
c. "As the price of cell phones fell, producers found their revenues soaring."
A.
The demand is elastic.
B.
The demand has unit elasticity.
C.
The demand is inelastic.
D.
This quotation tells nothing about the elasticity of demand.
d. "Coffee to me is an essential good-I've just got to have it no matter what the price."
A.
The speaker's demand is perfectly inelastic.
B.
The market demand is perfectly elastic.
C.
The market demand is perfectly inelastic.
D.
The speaker's demand is perfectly elastic.
e. "The soaring price of condominiums does little to curb the strong demand in Vancouver."
A.
The demand is elastic.
B.
The demand is inelastic.
C.
The demand has unit elasticity.
D.
This quotation tells nothing about the elasticity of demand.
(Question a) (B)
Tumbling wheat price means price of wheat has decreased due to increase in supply. Since wheat farmers have suffered loss, it means their revenue has decreased. Revenue will decrease from a decrease in price only when demand is inelastic.
(Question b) (C)
Revenue will decrease from a decrease in price only when demand is inelastic.
(Question c) (A)
Revenue will increase from a decrease in price only when demand is elastic.
(Question d) (A)
When demand is perfectly inelastic, % change in quantity demanded does not change with % change in price, so the demand curve is vertical.
(Question e) (B)
When increase in price does not impact quantity demanded much, demand is inelastic.
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