Question

1. The price elasticity of demand for a commodity is -2. If the quantity demanded for the commodity increased by 10 percent, then the price

a. increased by 5 percent.

b. decreased by 5 percent.

c. increased by 10 percent.

d. decreased by 10 percent.

2. If income doubles and the quantity demanded of automobiles more than doubles, then automobiles can be described as a

a. substitute good.

b. complement good.

c. necessity.

d. luxury.

3. If market demand for owner-occupied housing is elastic, an increase in price will cause the total spending (price times quantity) to

a. rise.

b. fall.

c. remain unchanged.

d. change in a way that cannot be determined.