Question

1.A box of corn flakes cereal is likely to be:

very price elastic, since there are many close substitutes available.

less price elastic, since there are many close substitutes available.

very price elastic, since the cereal is a unique product.

less price elastic, since the cereal is a unique product.

2.

If the price of a DVD decreases by 50 percent, the quantity demanded increases by 75 percent. The price elasticity of demand is:

−1.5 and is elastic.

−0.67 and is inelastic.

−1.5 and is inelastic.

3.

The concept of elasticity can be used to measure responses to a change in:

The production of an unrelated good.

All of these are true.

the price of a good.

the price of an unrelated good.

4.

Demand for a good is inelastic if:

the quantity effect outweighs the price effect of a price increase.

total revenue decreases as a result of a price increase.

None of these is true.

the measured elasticity is less than 1.

−0.67 and is elastic.

Answer 1

1. The correct answer is very price elastic, since there are many close substiutes available.

2. The correct answer is -1.5 and is elastic.

Because price elasticity of Demand = %∆Q/ %∆P

So elasticity = 75/50 = 1.5 hence Ed > 1.

3. The correct answer is The price of the good

Because concept of elasticity use to measure by change in quantity due to Change in price. So it means the when price of goods change the quantity also changes

4 the correct answer is the measured elasticity is less than 1.

Because when percentage change in the quantity Demanded is less than percentage Change in price, then demand for such a commodity is said to be less elastic or inelastic