chp 5

Question 1

Price elasticity of demand

Answer 1

percentage change in quantity demanded to the
percentage change in price

Question 2

necessities have ____ demands while luxuries have ____ demands

Answer 2

1. inelastic
2. elastic

Question 3

price elasticity of demand

Answer 3

e=percentage change in Q/percentage change in P

or

(Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]

or

ΔQd ÷ average Qd / Δprice ÷ average price

Question 4

when demand is greater than 1? is 1? and less than 1?

Answer 4

greater than 1 is: elastic
is 1: unit elastic
less than 1: inelastic

Question 5

perfectly in elastic? elastic?

Answer 5

perfectly elastic: approaches infinity
perfeclty inelsatic: is zero

Question 6

The _____ the demand curve that passes through a given point, the greater the price elasticity of
demand.

Answer 6

flatter

Question 7

The _____ the demand curve that passes through a given point, the smaller the price elasticity of
demand

Answer 7

steeper