1. When demand is inelastic, a decrease in price will cause
Ā
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d.no change in total revenue but a decrease in quantity demanded.
Ā
2. For which of the following types of goods would the income elasticity of demand be positive and relatively large?
Ā
a. all inferior goods
b. all normal goods
c. goods for which there are many complements
d. luxuries
Ā
3. Which of the following should be held constant when calculating the income elasticity of demand?
Ā
a. the quantity of the good demanded
b. the price of the good
c. income
d. All of the above should be held constant.
Ā
4. Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be
Ā
a. positive.
b. negative.
c. either positive or negative. It depends on whether A and B are normal goods or inferior goods.
d. either positive or negative. It depends on whether the current price level is on the elastic or inelastic portion of the demand curve.
Ā
5. As the price elasticity of supply increases, the supply curve
Ā
a. becomes flatter
b. becomes steeper
c. becomes downward sloping.
d. shifts to the right.
Ā