Q: Which formula correctly represents the arc price elasticity of demand between two points?

$$E_p = (\Delta Q / \Delta P) \times (\overline{P} / \overline{Q})$$

Question 1

Suppose the supply curve for a product shifts to the right due to technological advancements. What is the most likely effect on equilibrium price and quantity, all else equal?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases

Question 2

If the demand for a good increases due to a rise in consumer income, which of the following best describes the shift in the demand curve and its effect on equilibrium?

Accepted Answer

Demand curve shifts right; equilibrium price and quantity increase

Question 3

A market is in equilibrium at price $$P_0$$ and quantity $$Q_0. If a $$price ceiling is set below $$P_0$$, what is the most likely immediate market outcome?

Accepted Answer

A shortage will occur because quantity demanded exceeds quantity supplied

Question 4

Given the linear demand function $$Q = 10 - 2P$$, what is the price elasticity of demand when $$P = 3$$?

Accepted Answer

$$E_p = -1.2$$

Question 5

Which formula correctly represents the arc price elasticity of demand between two points?

Accepted Answer

$$E_p = (\Delta Q / \Delta P) 	imes (\overline{P} / \overline{Q})$$

Question 6

If the supply of copper is more elastic in the long run than in the short run, which of the following best explains why?

Accepted Answer

Firms can adjust production capacity and enter or exit the market more easily over time

Question 7

A perfectly inelastic demand curve implies that:

Accepted Answer

Consumers will buy a fixed quantity regardless of price

Question 8

Suppose the demand for gasoline is more elastic in the long run than in the short run. Which real-world behavior best explains this phenomenon?

Accepted Answer

Consumers can switch to more fuel-efficient cars over time

Question 9

If the demand curve for a good is $$Q = a - bP$$, what happens to the price elasticity of demand as you move down the curve (from high price to low price)?

Accepted Answer

Elasticity decreases in magnitude (becomes less negative)

Question 10

A perfectly elastic demand curve is represented graphically as:

Accepted Answer

A horizontal line

Question 11

Suppose the supply function is $$Q_s = 2P$$ and the demand function is $$Q_d = 10 - P. $$What is the equilibrium price?

Accepted Answer

$$P = 4$$

Question 12

Which of the following best describes the effect of a leftward shift in the demand curve, all else equal?

Accepted Answer

Equilibrium price and quantity both decrease

Question 13

If the price elasticity of demand for a product is $$-0.5$$, what does this imply about consumer responsiveness?

Accepted Answer

Demand is inelastic; consumers are not very responsive to price changes

Question 14

Which of the following is the correct formula for point price elasticity of demand?

Accepted Answer

$$E_p = (\Delta Q / \Delta P) 	imes (P / Q)$$

Question 15

A government imposes a price floor above the equilibrium price. What is the most likely result in the market?

Accepted Answer

A surplus, because quantity supplied exceeds quantity demanded

Question 16

If the income elasticity of demand for a good is positive, the good is:

Accepted Answer

A normal good

Question 17

Suppose the demand for a product is given by $$Q = 20 - 4P$$ and the supply is $$Q = 2P. $$What is the equilibrium quantity?

Accepted Answer

$$Q = 16$$

Question 18

Which of the following statements about the short-run and long-run elasticities of demand is correct?

Accepted Answer

Demand is always more elastic in the long run

Question 19

If a 10% increase in price leads to a 20% decrease in quantity demanded, what is the price elasticity of demand?

Accepted Answer

$$E_p = -2$$

Question 20

A market for used cars experiences a sudden increase in demand due to a new tax on new cars. What is the likely short-run and long-run effect on the equilibrium quantity of used cars sold?

Accepted Answer

Short-run: small increase; long-run: larger increase as old cars are replaced

Supply, Demand, and Elasticity: Core Concepts in Microeconomics

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