EC 110 EXAM 2 – ZIRLOTT QUESTIONS
WITH CORRECT ANSWERS 2026/2027
Elasticity - CORRECT ANSWER --measures how much one variable responds to changes in
another variable.
a numerical measure of the responsiveness of Quantity demanded or Quantity supplied to one
of its determinants.
Price Sensitivity - CORRECT ANSWER -is the degree to which the *price* of a product *affects
consumers' purchasing behaviors.*
Time Horizon - CORRECT ANSWER -longer the time more elastic the demand
example. gas, if gas prices rise the demand falls only slightly in a few months, but as years go by,
people buy more fuel efficient cars and use public transport instead
Price Elasticity of Demand - CORRECT ANSWER -measures how much Quantity demanded
responds to a change in Price. Loosely speaking, measures the price sensitivity of buyers'
demand.
How do you calculate Price Elasticity of Demand? - CORRECT ANSWER -Using midpoint method
= (Q2-Q1)/[(Q2+Q1)]/2] / (P2-P1)/[(P2+P1)/2]
Do NOT use negative numbers.
, Why is the midpoint method better for calculating elasticity? - CORRECT ANSWER -It doesn't
matter which value you use at the "start" and which as the "end" - you get the same answer
either way.
What is the relationship between slope and elasticity? - CORRECT ANSWER -Slope is a ratio of
two changes
Elasticity is a ratio of two % changes.
THE FLATTER THE CURVE, THE BIGGER THE ELASTICITY.
THE STEEPER THE CURVE, THE SMALLER THE ELASTICITY.
"Elastic Demand" Curve - CORRECT ANSWER ->1, relatively flat, consumers' price sensitivity is
relatively high
"Inelastic Demand" Curve - CORRECT ANSWER -<1, relatively steep, Consumers' price sensitivity
relatively low
"Unit Elastic Demand" Curve - CORRECT ANSWER -=1, intermediate slope, price sensitivity
intermediate,
price and quantity changed by the same percentage
- this cancels out any change in revenue (Total Revenue stays the same).
"Perfectly Inelastic Demand" Curve - CORRECT ANSWER -=0, vertical,
consumers' price sensitivity: none
example: insulin to a diabetic
"Perfectly Elastic Demand" Curve - CORRECT ANSWER -=infinity, horizontal, price sensitivity
extreme.
example: a fisherman tries to sell his fish higher than market price, so he won't sell a single one.
WITH CORRECT ANSWERS 2026/2027
Elasticity - CORRECT ANSWER --measures how much one variable responds to changes in
another variable.
a numerical measure of the responsiveness of Quantity demanded or Quantity supplied to one
of its determinants.
Price Sensitivity - CORRECT ANSWER -is the degree to which the *price* of a product *affects
consumers' purchasing behaviors.*
Time Horizon - CORRECT ANSWER -longer the time more elastic the demand
example. gas, if gas prices rise the demand falls only slightly in a few months, but as years go by,
people buy more fuel efficient cars and use public transport instead
Price Elasticity of Demand - CORRECT ANSWER -measures how much Quantity demanded
responds to a change in Price. Loosely speaking, measures the price sensitivity of buyers'
demand.
How do you calculate Price Elasticity of Demand? - CORRECT ANSWER -Using midpoint method
= (Q2-Q1)/[(Q2+Q1)]/2] / (P2-P1)/[(P2+P1)/2]
Do NOT use negative numbers.
, Why is the midpoint method better for calculating elasticity? - CORRECT ANSWER -It doesn't
matter which value you use at the "start" and which as the "end" - you get the same answer
either way.
What is the relationship between slope and elasticity? - CORRECT ANSWER -Slope is a ratio of
two changes
Elasticity is a ratio of two % changes.
THE FLATTER THE CURVE, THE BIGGER THE ELASTICITY.
THE STEEPER THE CURVE, THE SMALLER THE ELASTICITY.
"Elastic Demand" Curve - CORRECT ANSWER ->1, relatively flat, consumers' price sensitivity is
relatively high
"Inelastic Demand" Curve - CORRECT ANSWER -<1, relatively steep, Consumers' price sensitivity
relatively low
"Unit Elastic Demand" Curve - CORRECT ANSWER -=1, intermediate slope, price sensitivity
intermediate,
price and quantity changed by the same percentage
- this cancels out any change in revenue (Total Revenue stays the same).
"Perfectly Inelastic Demand" Curve - CORRECT ANSWER -=0, vertical,
consumers' price sensitivity: none
example: insulin to a diabetic
"Perfectly Elastic Demand" Curve - CORRECT ANSWER -=infinity, horizontal, price sensitivity
extreme.
example: a fisherman tries to sell his fish higher than market price, so he won't sell a single one.
