Economics Answer Sheet

Elasticity and its uses (Demand and Supply)

Name: Malcolm Tumana Course: Business Studies (1B)

ID Number: 180148

Price Elasticity of Demand

Multiple Choice Question

1. C
2. D
3. D
4. B
5. A
6. A
7. C
8. D
9. E
10. B
11. E
12. B
13. A
14. A
15. C
16. D

True/ False Questions

17. False
18. False
19. False
Terminology for discussing Elasticity
Multiple Choice
20. B
21. D
22. C
23. B
24. A
25. C
26. D
27. E
28. A
29. E
30. A
31. C
32. E
33. A
34. E

True/ False Questions

35. True
36. False
37. True
38. True

Elasticity and Sketches of Demand Curves

Multiple Choice Questions
39. A
40. E
41. A
42. A

Calculating the Elasticity with the Midpoint Formula

Multiple Choice Question
43. E
44. A
45. A
46. C
47. D
Revenue and the Price Elasticity of Demand
Multiple Choice Question
48. B
49. A
50. E
51. A
52. C
53. B
54. B
55. B
56. B
57. C
True/ False Question
58. True
59. False
60. True

Differences in the Price Elasticity of Demand

Multiple Choice Question
61. B
62. E
63. A
64. D
65. A

True/ False Question

66. True
67. False
68. False
Income Elasticity of Demand and Cross- Price Elasticity of Demand
Multiple Choice Question
69. C
70. A
71. C
72. B
73. C
74. D
75. C
76. D
77. D
78. D
True/ False Question
79. True
80. True
81. False

Short Answer Question

82. Because Price Elasticity of Demand tells us of how much a change in price affect the
quantity demanded, therefore, economists care about it because of consumer
expenditure (how much they are willing and able to buy). For instance, if the price is too
high, not all can afford.

83. Because it can be little misleading.

84. Unit Elastic: same change in both; sensitive

Elastic: Quantity demanded is greater; sensitive
Inelastic: Price is greater; insensitive

85. When the demand is inelastic, an increase in price will result in an increase in revenue
and a decrease in price will lead to a decrease in revenue. When it is unit elastic, the
change in price will result in the same change in revenue. When the demand is elastic, it
will be the opposite of inelastic. An increase in price will result in a decrease in revenue
and a decrease in price will result an increase in revenue.
 86. The four things that make price elasticity of demand vary are; food, beer, wine and cars.
They make the price vary, because in each there are close substitutes and also because
when income increase, the demand will increase and when the income decrease the
demand will decrease as well.

87. The other two price elasticity of demand discussed in the book are; Income elasticity of
demand; and; Cross-price elasticity of demand. Income elasticity of demand is the
change in percentage of quantity demanded over the change on income. The cross price
elasticity of demand measures the change of the quantity demanded for a good to a
change in the price of another good.

Problems

88. PED= 4.04 (to 2 dp); elastic

89. PED= 0.31 (to 2 dp); inelastic

90. PED= 1.84 (to 2 dp); elastic

91. PED= 2.48 (to 2 dp); elastic

92. PED= 1; unit elastic

93. PED= 5.202 (to 3 dp); elastic

94. Price Elasticity is 0.18 (to 2 dp)

Price Elasticity of supply

Multiple Choice
95. D
96. A
97. D
98. A
99. C
100. E
101. B
102. A
103. B
 104. C
105. E

True/ False Questions

106. False
107. True
108. False
109. False
110. True
111. True
112. False

Short Answer Question

113. Price Elasticity of Supply tells us of how much will a change in price affect the
quantity supplied, therefore, economists care about it because of what suppliers are
willing and able to produce at a certain price change. For instance, if price increases, the
supply will also increase because the suppliers will want to make a profit.

Multiple Choice Question

114. B
115. E
116. C
117. B
118. C
119. A