AP Micro AP Micro Elasticity

Question 1

If the price of a good rises by 10% and quantity demanded falls by 20%, the price elasticity of demand is:

Accepted Answer

2.0

Answer

0.5

Answer

1.0

Answer

0.2

Question 2

A good with a price elasticity of demand equal to 0.3 is considered:

Accepted Answer

Inelastic

Answer

Perfectly elastic

Answer

Unit elastic

Answer

Elastic

Question 3

Which of the following goods is most likely to have highly inelastic demand?

Accepted Answer

Insulin for diabetics

Answer

Luxury vacations

Answer

Designer handbags

Answer

Restaurant meals

Question 4

If a 5% increase in consumer income leads to a 10% increase in demand for a good, the income elasticity of demand is:

Accepted Answer

2.0

Answer

0.5

Answer

−2.0

Answer

1.0

Question 5

A negative income elasticity of demand indicates the good is a(n):

Accepted Answer

Inferior good

Answer

Normal good

Answer

Luxury good

Answer

Complement

Question 6

Cross-price elasticity of demand is positive when two goods are:

Accepted Answer

Substitutes

Answer

Complements

Answer

Inferior goods

Answer

Normal goods