First: Multiple choice:
1. The price elasticity of demand is equal to
a) The percentage change in quantity demanded divided by the percentage change in price.
b) The value of the slope of the demand curve.
c) The change in quantity demanded divided by the change in price.
d) The percentage change in price divided by the percentage change in quantity demanded.
2. If the quantity demanded for gasoline increased by 10% after a decrease in its price by
20%, this means that:
a) Ed < |-1|
b) Ed =|-1|
c) Ed >|-1|
d) ED > 0
3. If the demand equation is Qd = 10 – 0.5 P, and the price is changed from $4 to $6, the
elasticity of demand is:
a) |-0.50|
b) |-0.25|
c) |-1.10|
d) None of the above
4. Consumer expenditure increased as the price of the product increased:
a) Demand is elastic
