AP Micro AP Micro Elasticity 2

Question 1

Along a linear demand curve, as price falls from a high level toward zero, price elasticity of demand:

Accepted Answer

Decreases from elastic to inelastic

Answer

Along a linear demand curve, the upper portion is elastic and the lower portion is inelastic, so elasticity decreases as price falls.

Question 2

If a firm raises its price and total revenue increases, demand for its product is:

Accepted Answer

Inelastic

Answer

When demand is inelastic (PED < 1), a price increase raises total revenue because the quantity drop is proportionally smaller.

Question 3

The price elasticity of supply measures:

Accepted Answer

How quantity supplied responds to a price change

Answer

Price elasticity of supply = % change in quantity supplied / % change in price.

Question 4

Supply tends to be more elastic when:

Accepted Answer

Producers have a longer time horizon

Answer

Over longer time periods, producers can adjust inputs and capacity, making supply more responsive to price changes.

Question 5

Which factor tends to make demand more elastic?

Accepted Answer

A longer time period for adjustment

Answer

Over longer time periods, consumers can find alternatives and adjust behavior, increasing elasticity.

AP Practice Test