1) When we calculate the price elasticity of demand, we use percentages of the average price and the average quantity in order to get the same value for the elasticity regardless of whether the price falls or rises.
2) If the quantity demanded of a good decreases by 10 percent when the price of the good increases by 5 percent, the elasticity of demand is -2.00.
3) If the demand for a good is perfectly elastic, then the demand curve is horizontal.
4) The elasticity of demand is constant along a downward sloping straight-line demand curve.
5) If the demand for Al-Baik is price elastic, a fall in the price of Al-Baik will raise the total revenue.
6) If the demand is unit elastic, a price cut will leave the quantity demanded unchanged.
7) If a hot dog vendor on a street corner experiences an increase in total revenue after lowering the price of a hot dog, then the demand for the hot dogs must be elastic.
8) The larger the portion of a person's total budget spent on a good, the more inelastic the demand for the good.
9) A necessity (such as food and shelter) generally has an inelastic demand.
10) If the cross elasticity of demand between Jeep Cherokees and Chevy Lumina Vans is 1.55, then the two vehicles are not substitutes in the eyes of car buyers.
11) Studies show that smoking cigars is inversely related to income. Thus cigars are an inferior good.
12) Damage from floods and hurricanes which destroy a large portion of this year's crop of oranges will definitely make oranges more price inelastic in supply.
Answer: TRUE Answer: FALSE Answer: TRUE Answer: FALSE Answer: TRUE Answer: FALSE Answer: TRUE Answer: FALSE Answer: TRUE Answer: FALSE Answer: TRUE Answer: FALSE
