Elasticity

Question 1

Perfectly inelastic demand

Answer 1

0

-Price has no effect on quantity demand (vertical demand curve)

Question 2

Inelastic demand

Answer 2

Between 0 and 1

-A rise in price increases total revenue

Question 3

unit-elastic demand

Answer 3

Exactly 1

-changes in price have no effect on total revenue.

Question 4

elastic demand

Answer 4

Greater than 1, less than infinity

A rise in price reduces total revenue.

Question 5

perfectly elastic demand

Answer 5

∞

A rise in price causes Qd to fall to 0. A fall in price leads to an infinite quantity demand ()horizontal demand curve)

Question 6

Complements

Answer 6

Negative

Quantity demanded of one good falls when the price of another rises.

Question 7

Substitutes

Answer 7

positive

Quantity demanded of one good rises when the price of another rises.

Question 8

Cross-price elasticity

Answer 8

%∆ in Q of one good demanded / %∆ in price of another good

Question 9

Income elasticity of demand

Answer 9

%∆ in Qd / %∆ in income

Question 10

Inferior good

Answer 10

Negative

Quantity demand falls falls when income rises

Question 11

Normal good, income-inelastic

Answer 11

Positive, less than 1

Quantity demanded rises when income rises,
but not as rapidly as income.

Question 12

Normal good, income-elastic

Answer 12

Greater than 1

Quantity demand rises when income rises, and more rapidly than income.