Chapter 6 - Elasticity

Question 1

Elastic demand

Answer 1

When an increase in price reduces the quantity demanded

Question 2

Inelastic demand

Answer 2

When an increase in reduces the quantity demanded a little or not at all

Question 3

Price effect

Answer 3

After a price increase, each unit sells at a higher price, which raises revenue

Question 4

Quantity effect

Answer 4

After a price increase, fewer units are sold, which tends to lower revenue

Question 5

When does quantity effect dominate

Answer 5

When the demand is elastic

Question 6

Necessity good

Answer 6

Quantity demanded does not change much in responds to a change in price

Question 7

Luxury goods

Answer 7

Quantity demanded is more sensitive to a change in price

Question 8

Substitutes when demand is elastic

Answer 8

More substitutes

Question 9

Substitutes when demand is inelastic

Answer 9

Fewer substitutes

Question 10

Normal goods

Answer 10

Income elasticity is positive

Question 11

Inferior goods

Answer 11

Income elasticity is negative

Question 12

When is supply curve elastic

Answer 12

Rise in price increases the quantity supplied a lot

Question 13

When is supply curve inelastic

Answer 13

Rise in price increases the quantity supplied just a little