15. The price elasticity of demand coefficient measures: A buyer responsiveness

Question

15. The price elasticity of demand coefficient measures: A buyer responsiveness to price changes B. the extent to which a demand curve shifts as incomes change. C, the slope of the demand curve. D. how far business executives can stretch their fixed costs 16. Suppose that as the price ory falls from S2.00 to $1.90, the quantity ofY demanded increases from 110 to 118. Then the price elasticity of demand is A. 4.00. B. 2.09. C. 1.45. D. 3.94. 17. A perfectly inelastic demand schedule: A. rises upward and to the right but has a constant slope. B. can be represented by a line parallel to the vertical axis. C. cannot be shown on a D. can be represented by a line parallel to the borizontal axis. graph 18. The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range: A. has declined B. is of unit elasticity, C. is inelastic. D. is elastic.

Explanation / Answer

15. Ans: buyer resposiveness to price changes

16. Ans: 1.45

Explanation:

PED = (118-110) / (1.90 - 2.00) * (2.00 / 110)

= -1.45

The absolute value is 1.45

17. Ans: can be represented by a line parallal to vertical axis.

18. Ans: is elastic

Explanation:

PED = (60 - 50) / (90 - 100) * (100 / 50)

= -2

The absolute value is 2. Since, PED is greater than 1, demand for this good is elastic

19. Ans: an increase in price will increase total revenue

20. Ans: price rises and demand is elastic

21. Ans: price rises and demand is inelastic

22. Ans: total explicit cost

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