BEC 5 M3: The Economic Marketplace

Question 1

Unit elastic

Answer 1

Definition: Unit elastic demand is an economic theory that assumes a change in price will cause an equal proportional change in quantity demanded

Question 2

the relationship between price and quantity demanded is

Answer 2

inverse

Question 3

a surplus can only arise if there is

Answer 3

a minimum price above the equilibrium price

Question 4

elasticity of demand formula

Answer 4

% change in demand/%change in price

Question 5

inferior good

Answer 5

one for which demand declines as income increases

Question 6

price elasticity of demand

Answer 6

((Q1-Q2)/Q1)/((P2-P1)/P1)

Question 7

movement along demand curve from one price-quantity combination to another is called:

Answer 7

change in quantity demanded

Question 8

a price elasticity of demand of 2.0 means

Answer 8

demand will change x2 for any change in price

Question 9

an increase in the price of a complementary good causes the demand curve to

Answer 9

shift to the left

Question 10

Positive vs negative number in cross elasticity calculation

Answer 10

Positive number means they are substitutes of each other. Negative means they are complementary of each other

Question 11

Positive vs negative number for income elasticity calculation

Answer 11

Positive number means superior good. Negative number means inferior good.