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Which of the following statements about price elasticity of demand is true?
a. The price elasticity of demand for good measures the willingness of buyers of the good to buy less of the good as its price increases.
b. Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes.
c. Other things equal, if good X has close substitutes and good Y does not have close substitutes, then the demand for good X will be more elastic than the demand for the good Y.
d. All of the above are correct.

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Sonia Dhawan
Sonia DhawanLv10
24 Sep 2020
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Related questions

Which of the following statements about the price elasticity of demand is correct?

a. The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases.

b. Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes.

c. Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y.

d. All of the above are correct.

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

  • Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
  • Provide examples on how the availability of close substitutes affects price elasticity of demand.
  • Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

Please answer ALL bulletins and place the answers under the correct bulletin.

1) All else being equal, the more imprtant an item is in buyers' budgets, the more elastic is demand for the good. (TRUE/FALSE)

2) If the demand curve for a good is a steep, straight line, then the demand for the good is inelastic at every point along that demand curve. (TRUE/FALSE)

3)If the demand for illegal drugs is inelastic, then government efforts to reduce the supply of illegal drugs are likely to cause an increase in total expenditure on them. (TRUE/FALSE)

4) If the demand for mass transit in a city is inelastic, then raising fares will increase mass transit revenue. (TRUE/FALSE)

5)The cross-price elasticity of demand between Levi's blue jeans and Wrangler's blue jeans is most likely positive (TRUE/FALSE)

6) Perfectly inelastic demand occurs when the demand curve is horizontal. (TRUE/FALSE)

7) Among the reasons that farmers' incomes are unstable is _____
A) The supply curve for food can shift dramatically rightward or leftward from year to year.
B) The demand for food is elastic
C) The income elasticity for food is very high
D) All of these
E) None of these

8) If the (absolute value of) the price elasticity of demand for a good is greater than one, then demand for the good is _____
A) Elastic
B) Inelastic
C) Inferior
D) Normal
E) Paranormal

9) As we move leftward along a straight-line demand curve, the (absolute value of the) price elasticity of demand ____
A) Grows smaller
B) Remains constant at zero
C) Remains constant at a value of one
D) Remains constant and equal to the (absolute value of the) slope of the demand curve
E) Grows larger

10) If a good is normal, we know that______
A) income elasticity is positive
B) The good's price elasticity of demand is positive
C) Demand for the good is elastic
D) Demand for the good is inelastic
E) Income elasticity is negative

11) When the price of a good rises by 10%, and nothing else changes, the quantity of the good demanded falls by 5%. The price elasticity of demand fort this good is_____
A) -0.5%
B) -5%
C) -5.0%
D) -2.0%
E) 2.0%

12) If the price elasticity of demand for a good is negative, we know that the good _____.
A) Obey's the law of demand
B) Is normal
C) Is inferior
D) Violates the law of demand
E) is inelastically demanded

13) Which of the following would you expect to have the greatest (in absolute value) price elasticity of demand?
A) Clothing
B) Pants
C) Blue jeans
D) Levi's Blue jeans
E) All of these answers would have approximately the same price elasticity of demand.

14) The price elasticity of demand for a good is -2.0 When the proce of this good rises, what occurs?
A) Quantity demanded will rise as well
B) The income of those who buy the good will increase
C) Total expenditure on this good will fall.
D) All of these
E) All of these answers would have approximately the same price elasticity of demand.

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