3-9.How can we measure Elasticity:
EC  QK / QX 1 PY / PY 1
QK / QX 1 PY 1 / PY
If, for example, in response to a 10%
increase in the price of fuel, the quantity
of new cars that are fuel inefficient
demanded decreased by 20%, the cross
elasticity of demand would be -20%/10%
= -2.
Multiple choice tests :
1. The price elasticity of demand
measures the nature and degree of the
relationship between:
a. Changes in quantity demanded of a
good and changes in its supply.
b. Changes in quantity demanded of a
good and changes in its price.
c. Changes in quantity supply of a
good and changes in its price.
d. Changes in quantity supply of a
good and changes in its quantity
demanded.
2. High elasticity of demand is:
a. The small change in price give the
same change in quantity demanded.
b. The small change in price give the
big change in quantity demanded.
c. The big change in price give the
big change in quantity demanded.
d. The big change in price give the
small
change
in
quantity
demanded.
3. low elasticity of demand is:
a. The big change in price gives the
small
change
in
quantity
demanded.
b. The big change in price gives the
big change in quantity demanded.
c. The small change in price gives the
small
change
in
quantity
demanded.
d. The small change in price gives the
big change in quantity demanded.
4. Unity elasticity is the:
a. Big change in price gives the big
change in quantity demanded.
b. Small change in price gives the
small
change
in
quantity
demanded.
c. Change in price gives the same
change in quantity demanded.
d. Big change in price gives the small
change in quantity demanded.
5. Cross elasticity of demand measures
the responsiveness of:
a. The quantity demand of a good to
a change in the price of another
good.
b. The quantity demand of a good to a
change in its price.
c. The quantity demand of a good to a
change in the quantity supply of
another good.
d. The quantity supply of a good to a
change in the price of another
good.
6. Translate the following paragraph:Consumer Demand
In economic department Zahra’a
asked Sarah about concept of
Consumer Demand, Sarah said it
means (Study of how people use their
limited means to make purposeful
choices, and Assumes that consumers
understand their choices (possibilities)
and the prices (opportunity costs)
associated with each choice, and
Assumes that consumers consider the
alternatives and choose the one that
they like best).
Zahra’a
added there are two
Components of Consumer Demand
(first Opportunities: which means:
What can the consumer afford? And
What
are
the
consumption
possibilities? And Summarized by the
budget
constraint,
second
Preferences: which means: What does
the consumer like? And How much
does a consumer like a good? And
Summarized by the utility function.)