The ceteris paribus assumption applies to all the

following questions
1) The price elasticity of demand is calculated as the percentage change
in the quantity demanded divided by the percentage change in price.
T

2) A horizontal demand curve is perfectly inelastic. F

3) A vertical demand curve is perfectly inelastic. T

4) The elasticity of demand stays constant along a linear down-ward

sloping demand curve. F

5) If a 3 per cent decrease in the price of BMW cars results in a 3 per

cent increase in the number of BMW cars sold, the demand for BMW
cars is unit elastic. T

6) If an increase in the price of Arnott’s biscuits from $2.00 to $2.50 per

packet causes quantity demanded to decrease from 8500 to 7500
packets per day, the demand for Arnott’s biscuits within this price
range is inelastic. T

7) If the demand for Flora margarine is elastic, its manufacturer should

raise price to increase its total revenue. F

8) If the demand for lichee is inelastic, price charged and total revenue
should rise and fall together. T

9) A mother who buys her son two sets of school uniforms every year
regardless of changes in their prices has a perfectly inelastic demand
for school uniforms. T

10) If the demand for potatoes is inelastic, a bumper crop of potatoes

will result in a lower total revenue for potato farmers taken as a
group. T

11) The more readily available substitutes a good has, the less elastic
will be its demand. F

12) The longer the period of observation after a price change, the
lower is the measured price elasticity of demand. F

13) A family’s demand for salt is likely to be less elastic than its
demand for fillet steak. T

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14) If you like Arnott’s, Nabisco, and Weston biscuits equally well,
your demand for any particular brand is likely to be elastic. T

15) A chocoholic’s demand for chocolates is likely to be very elastic. F

16) The income elasticity of demand is the percentage change in the

quantity demanded divided by the percentage change in income. T

17) If the income elasticity of demand for generic brand products is

positive, generic brand products are inferior goods. F

18) The cross elasticity of demand measures the effect of a change in

the price of one good on the quantity demanded of another good. T

19) The cross elasticity of demand between goods that are good
substitutes could be expected to be positive and high. T

20) If lamb chops and tomato sauce are complements, we can expect
the cross elasticity of demand between lamb chops and tomato sauce
to be a positive figure. F

21) Supply elasticity is a measure of the responsiveness of the

quantity supplied to changes in consumer income. F

22) If a 3 per cent increase in the price of wine induces a 9 per cent
increase in quantity supplied, the supply of wine is elastic. T

23) The demand for one particular brand of insulin by a diabetic is

likely to be more elastic than the diabetic’s demand for insulin
generally. T

24) If a decrease in the supply of milk causes the total revenue of

dairy farmers as a group to increase, the demand for milk must be
inelastic. T

25) If the demand for hotel accomodation at the Gold Coast in

Queensland is linear, the total revenue of all hotel owners taken as a
group should remain the same regardless of changes in total tariffs. F

26) Vietnam’s total arable land supply can be described as perfectly

inelastic at least in the short run. T

27) If the income elasticity of demand for education by poor parents is

very close to zero, giving poor families additional income will not be
effective in giving their children more access to education. T

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28) If the demand for cigarettes is inelastic, an increase in the price of
cigarettes will not bring about a proportionate derease in cigarette
consumption; it will only raise the revenue of cigarette manufacturers
as a group. T