Question

Q73. the price is 3, the quantity demanded is 8. When the price is 6, the quantity demanded is 4. What is the price elasticity of When demand?      -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

               

Q74. A perfectly inelastic demand curve will be ---------------- on a graph while a perfectly elastic demand curve will be ------------------on a graph.        a. vertical; horizontal             b. horizontal; vertical           c. vertical; vertical                       d. horizontal; horizontal

                               

Q75. When demand is price-inelastic, a price decrease will result in:

a. an increase in total cost.   b. an increase in total revenue.       c. a decrease in total cost.      d. a decrease in total revenue.

               

Q76. The practice of charging different prices to different buyers is called:

a. total revenue.             b. price discrimination.                 c. price elasticity.                 d. an increase in demand.

Q77. A percentage change in quantity supplied divided by a percentage change in price is called:

a. income elasticity.              b. price elasticity of demand.            c. price elasticity of supply.        d. elasticity of substitution.

Q78. When governments restrict agricultural production, the supply curve to shifts to the ----------, the equilibrium price ---------------, and the result is --------------------------------- revenue for farmers.

a. right; decreases; higher         b. left; decreases; higher             c. left; increases; lower               d. left; increases; higher

Answer 1

Since the elasticity of demand can be defined as the measurement of the degree of the responsiveness of the quantity demand due to the change in the price level

a.

Ed = % change in the quantity demand of good X/ % change in the price of good X

73.

P1=3                           Q1=8

P2=6                           Q2=4

Ed=(Q2-Q1)/(P2-P1) * P1/Q1

=(4-8)/(6-3)*3/8

=(-4)/3 *3/8

=(-1.33)*0.375

Ed= -0.498

Ed=0.498 <1

Hence the demand is inelastic.

74.

A perfectly inelastic demand curve will be vertical on a graph while a perfectly elastic demand curve will be horizontal on a graph.   

Hence option a is the correct answer.

75.

When demand is price-inelastic, a price decrease will result in decrease in total revenue.

This is because demand is inelastic, so with the decrease in the price will lead to increase in the quantity demand but % increase in the quantity demand will be less than % decrease in the price.

Hence option d is the correct answer.

76.

When the producer charges different price to different buyers, this is known as the practise of price discrimination.

Hence option b is the correct answer.