# lesson 4 - 1 Elasticity defines the response to a change in...

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1. Elasticity defines the response to a change in price along a supply line or a demand line. 2. The total revenue test will determine if a price change is elastic or inelastic , (mid point formula and coefficient of elasticity) but the both b. and c. are correct will measure the amount or degree of elasticity (sensitivity). 3. In the figure above, this product is price inelastic between Point E and Point F. 4. Products with many substitutes will be elastic. 5. Automation can result in employee layoffs if prices decrease because of lower costs, but consumers are in elastic to the price change. ( True ) 6. Elasticity of demand measures the amount of change in quantity purchased compared to the change in price of the product. 7. There are two ways of measuring price elasticity - the total revenue test and the coefficient of elasticity (uses the midpoint formula). 8. In the figure above, this product is price elastic between Point B and Point C. 9. The most important determinant of Elasticity of Demand is the availability of substitute products . 10. The price of eggs is much less today than 50 years ago. But consumers are inelastic to the price decrease, thereby spending more on eggs today than 50 years ago. ( False ) 11. Elasticity of supply measures the amount of change in quantity brought to the market by a change in price . 12. There are many alternatives (substitute products) among fast food restaurants, so the quantities of their products being sold tend to be elastic (sensitive) to price changes. 13. The total revenue test will determine if a price change is elastic or inelastic, but will not measure the amount or degree of elasticity (sensitivity). 14. The elasticity coefficient ( E d ) is elastic when the coefficient is greater than 1 (the numerator is greater than the denominator). 15. When a large percentage of the household budget is spent on an item, it’s demand tends to be elastic . 16. If the coefficient of elasticity equals 1.7 on a product’s demand line, then a 1% increase in price will yield a 1.7% decrease in quantity demanded. 17. Consider the case of a melon farmer when his crop will mature within a week and the

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## This note was uploaded on 06/18/2011 for the course ECON 2301 taught by Professor Newbury during the Spring '10 term at Richland Community College.

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lesson 4 - 1 Elasticity defines the response to a change in...

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