1) When we calculate the price elasticity of
demand, we use percentages of the average price
and the average quantity in order to get the same
value for the elasticity regardless of whether the
price falls or rises.
2) If the quantity demanded of a good decreases
by 10 percent when the price of the good
increases by 5 percent, the elasticity of demand
is -2.00.
3) If the demand for a good is perfectly elastic,
then the demand curve is horizontal.
4) The elasticity of demand is constant along a
downward sloping straight-line demand curve.
5) If the demand for Al-Baik is price elastic, a fall
in the price of Al-Baik will raise the total
revenue.
6) If the demand is unit elastic, a price cut will
leave the quantity demanded unchanged.
7) If a hot dog vendor on a street corner
experiences an increase in total revenue after
lowering the price of a hot dog, then the
demand for the hot dogs must be elastic.
8) The larger the portion of a person's total
budget spent on a good, the more inelastic the
demand for the good.
9) A necessity (such as food and shelter)
generally has an inelastic demand.
10) If the cross elasticity of demand between
Jeep Cherokees and Chevy Lumina Vans is 1.55,
then the two vehicles are not substitutes in the
eyes of car buyers.
11) Studies show that smoking cigars is
inversely related to income. Thus cigars are an
inferior good.
12) Damage from floods and hurricanes which
destroy a large portion of this year's crop of
oranges will definitely make oranges more price
inelastic in supply.
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