MITBch05 - CHAPTER 5 1DEMAND AND ELASTICITY TRUE-FALSE...

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C HAPTER 5 1D EMAND AND E LASTICITY T RUE -F ALSE Q UESTIONS ELASTICITY: THE MEASURE OF RESPONSIVENESS 1 . The market demand curve shows how the quantity demanded of a product, during a specified time  period, changes as the price of that product changes. ANSWER: T, E, A 2. The law of demand states that a lower price increases the amount of a commodity that people are  willing to buy. ANSWER: T, E, R 3. The demand curve depicts quantities demanded that have been gathered as prices have changed over  time. ANSWER: F, D, A 4. The quantity demanded in a market depends on many things, but the concept of elasticity focuses on  the effect of changes in the price of the good. ANSWER: T, M, I 5. Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price. ANSWER: T, E, R 6. Elasticity of demand equals the ratio of the percentage change in quantity demanded to the  percentage change in the price of the good. ANSWER: T, E, R 7. Elasticity of demand equals the ratio of the percentage change in the price of a good to the  percentage change in the quantity demanded. ANSWER: F, E, R 8. Price elasticity of demand can be written as percentage change in Q divided by percentage change  in P. ANSWER: T, E, R 9. Elasticity of demand is calculated using percentage changes in both price and quantity. ANSWER: T, E, R 10. Price elasticity of demand is a numerical measure of how much quantity demanded rises as price  falls or quantity demanded falls as price rises. ANSWER: T, E, R 161
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162 Chapter 5/Demand and Elasticity 11. Elasticity computations related to demand carry a minus sign to show that the demand curve is  negatively sloped. ANSWER: F, M, R 12. The elasticity formula solves the units problem because percentages are unaffected by the units of  measure. ANSWER: T, E, A 13. The price elasticity of demand measure is generally stated as an absolute value. ANSWER: T, E, R 14. A line that is perfectly elastic has an elasticity of demand of zero. ANSWER: F, M, A 15. Perfectly inelastic demand schedules are vertical. ANSWER: T, M, A 16. Perfectly elastic demand schedules are vertical. ANSWER: F, M, A 17. A vertical demand curve has an elasticity of demand equal to zero. ANSWER: T, M, A 18. A horizontal demand curve is perfectly elastic because a change in price will not induce a change in  quantity demanded. ANSWER: F, D, A 19. A horizontal demand curve is perfectly elastic because a change in price will induce an infinite  change in quantity demanded.
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