Elasticity and Consumer Theory

Price elasticity of demand is calculated as:

1. % change in price ÷ % change in quantity demanded
2. Quantity ÷ price
3. Change in price × change in quantity
4. % change in quantity demanded ÷ % change in price

Demand is price elastic when the price elasticity is:

1. Less than 1
2. Greater than 1
3. Exactly 0
4. Exactly 1

Demand is price inelastic when the price elasticity is:

1. Exactly 1
2. Greater than 1
3. Less than 1
4. Infinite

When price elasticity of demand equals 1, demand is:

1. Perfectly elastic
2. Perfectly inelastic
3. Inferior
4. Unitary elastic

Price rises by 10% and quantity demanded falls by 20%. What is the price elasticity of demand?

1. 2 (elastic)
2. 1 (unitary)
3. 0.5 (inelastic)
4. 20

If demand is elastic, raising the price will cause total revenue to:

1. Stay the same
2. Double
3. Fall
4. Rise

If demand is inelastic, raising the price will cause total revenue to:

1. Rise
2. Fall
3. Become zero
4. Stay the same