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Price Elasticity of Demand on a Graph quiz

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  • How is perfectly elastic demand represented on a graph?
    It is shown as a horizontal line, indicating infinite elasticity.
  • What type of market commonly exhibits perfectly elastic demand?
    Perfectly competitive markets, such as those for wheat and foreign currency, commonly exhibit perfectly elastic demand.
  • What happens to quantity demanded if the price increases in a perfectly elastic market?
    The quantity demanded drops to zero if the price increases above the market price.
  • How is elastic demand depicted on a demand curve?
    Elastic demand is shown as a relatively flat or shallow curve.
  • What kind of goods typically have elastic demand?
    Goods with many substitutes, like beef and transportation, typically have elastic demand.
  • What is the relationship between price and quantity demanded in unit elastic demand?
    The percentage change in price equals the percentage change in quantity demanded.
  • What is a real-world example of a product with unit elastic demand?
    Clothing is a close real-world example, where a 40% price cut might lead to a 40% increase in quantity sold.
  • How does the demand curve change as elasticity decreases?
    The curve transitions from horizontal (perfectly elastic) to vertical (perfectly inelastic) as elasticity decreases.
  • How is inelastic demand shown on a graph?
    Inelastic demand is depicted as a steep curve.
  • What types of goods usually have inelastic demand?
    Necessities like cigarettes and gasoline usually have inelastic demand.
  • What happens to quantity demanded when price increases significantly for an inelastic good?
    Quantity demanded changes very little even with a significant price increase.
  • How is perfectly inelastic demand represented on a graph?
    It is shown as a vertical line, indicating quantity demanded does not change with price.
  • What is an example of a product with perfectly inelastic demand?
    A life-saving drug is an example, as people will buy it regardless of price.
  • What mnemonic can help you remember the difference between elastic and inelastic curves?
    'Elastic' is like lying down (horizontal), and 'inelastic' is like standing up (vertical).
  • Why is a straight line not a perfect representation of unit elastic demand?
    Because elasticity changes along a straight line, while unit elastic means equal percentage changes in price and quantity demanded.