Question 1

If total revenue does not change as a result of a rise in the price of a given good, it follows that demand is

Accepted Answer

A)  perfectly elastic.
B)  perfectly inelastic.
C)  unit elastic.
D)  inelastic.
E)  elastic.F) A) and C)
G) A) and D)

Question 2

Airlines that try to lower fares in order to increase revenue must believe that the demand for airline service is

Accepted Answer

A)  price inelastic.
B)  income elastic.
C)  income inelastic.
D)  price elastic.
E)  cross-price elastic.F) A) and B)
G) A) and C)

Question 3

The longer the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand.

Accepted Answer

A)  lower, price
B)  lower, income
C)  higher, price
D)  higher, incomeE) A) and B)
F) C) and D)

Question 4

Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in

Accepted Answer

A)  interest rates.
B)  price.
C)  supply.
D)  demand.E) A) and B)
F) All of the above

Exam 6: Elasticity

Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in