Question

q18. select all that apply

Which of the following are characteristics of resources with inelastic demand?

		Revenue moves in the opposite direction from price
		Revenue increases as the quantity supplied decreases
		Price times quantity, which measures the contribution to GDP, increases as the quantity produced decreases, even if this means that some people must reduce their consumption with terrible impacts on their health and welfare.
		Substitutes are readily available
		Price moves in the same direction as quantity
		Price and quantity are unrelated
		Small % changes in quantity lead to large % changes in price
		Prices tend to be stable
		Demand tends to be stable
		Demand is highly responsive to price

Answer 1

Keep in mind that good with inelastic demand are necessary goods.

Option A is incorrect because revenue rises as price rises and vice versa because consumer cannot reduce its demand.

Decrease in quantity supplied will cause movement along supply curve and reduce the price of a good. Reduced price will not raise revenue of inelastic good. Option B is incorrect.

Option D is incorrect because good with elastic demand have substitute available with it.

Decrease in quantity produced means supply curve shift to its left which cause price to rise and output to fall. Contribution to GDP rises when %change in price > %change in quantity which occur when demand is elastic which make this option incorrect.

Option E is incorrect as price and quantity always move in opposite direction because of negative slope of demand curve.

Option F is also incorrect because they are negatively related.

Option G is incorrect as large %change in price lead to small %change in quantity.

Option H is also incorrect.

Option I is correct because demand tends to stable even when price change.

Option J is incorrect because demand is very less resposive to price.