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Exercise 6

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Exercise 6 Solution Chapter 6 Elasticity: The Responsiveness of Demand and Supply ` 1) Price elasticity of demand measures A) how responsive suppliers are to price changes. B) how responsive sales are to changes in the price of a related good. C) how responsive quantity demanded is to a change in price. D) how responsive sales are to a change in buyers' incomes. Answer: C 2) If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded A) will increase by 45 percent. B) will increase by 5 percent. C) will decrease by 45 percent. D) will decrease by 5 percent. Answer: C 3) If demand is inelastic, the absolute value of the price elasticity of ?demand is A) one. B) less than one. C) greater than one. D) greater than the absolute value of the slope of the demand curve. Answer: B 4) If demand is perfectly inelastic, the absolute value of the price elasticity of demand is A) zero. B) less than one. C) more than one. D) equal to the absolute value of the slope of the demand curve. Answer: A 5) Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder? A) It is elastic. B) It is perfectly elastic. C) It is perfectly inelastic. D) The price elasticity coefficient is 0. Answer: C Figure 6-1

6) Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in A) Panel A. B) Panel B. C) Panel C. D) none of the above graphs. Answer: C 7) Refer to Figure 6-1. A

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