Take–away of today’s lecture

MCQ
 Lets recall

1. What are the types of elasticity of demand?

2. What factors affect the elasticity of demand?
Let’s discuss the MCQ’s
1. If the price of a good increases, then

a. the demand for complementary goods will

increase.

b. the demand for the good will increase.

c. the demand for substitute goods will increase.

d. the demand for the good will not decrease.

2. If consumer income declines, then the demand for

a. normal goods will increase.

b. inferior goods will increase.

c. substitute goods will increase.

d. complementary goods will increase.

3. Items of joint consumption will have __________
cross elasticity
a. Positive
b. Negative
c. Zero
d. None of the above
4. Elasticity of demand is determined by all the
following factors except:
a. Nature of the commodity
b. Availability of substitutes
c. Time
d. Government Policies
5. Positive cross elasticity between two commodities
implies that the goods are:
a. Complements
b. Substitutes
c. Inferior goods
d. Luxuries
6. What happens to the elasticity with time?
a. Decreases
b. Increases
c. No change
d. None of the above
7. Cross elasticity between car and tea would be
a. Positive
b. Negative
c. Unitary
d. Zero
8. If a 12% fall in price of burgers leads to a 3 %
increase in quantity demanded of burgers, then price
elasticity of demand would be:
a. - 1.25
b. - 4
c. - 0.25
d. - 0.5
9. Normal goods have _______________ income
elasticity
a. Positive
b. Negative
c. Zero
d. None of the above
10. Inferior goods have _______________ income
elasticity
a. Positive
b. Negative
c. Zero
d. None of the above
11. Necessity goods are relatively price
a. elastic
b. inelastic
c. Both (a) and (b)
d. None of the above
12. Luxury goods are relatively price
a. elastic
b. inelastic
c. Both (a) and (b)
d. None of the above
Let’s solve elasticity…
• The demand for apples in a small town was 200 kg
when the price was Rs 20 per kg. It expanded to
250 kg when the price was reduced to Rs1 8 per kg.
What is the elasticity of demand for apples in the
town?
Let’s read a case