Econ 102 Exam #2 PSU Questions and
Answers Graded A+
relatively flat graph indicates
steep one indicates - Correct answer-small change in price will cause a huge
change in quantity demanded
even with a very large price increase, Qd will only fall a small amount
elasticity - Correct answer-the sensitivity between 2 variables
price elasticity of demand - Correct answer-the sensitivity of the change in the qd
of a good in response to a change in the price of the good
demand is elastic when... - Correct answer-the qd is relatively responsive to a
change in the products own price
demand is inelastic when... - Correct answer-the qd is relatively unresponsive to
changes in price
elastic goods? - Correct answer-goods with many substitutes, specific brand of
cereal
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,inelastic goods - Correct answer-gas, college tuition, no good substitutes, cigs,
toilet paper, life saving drugs
determinants of price elasticity of demand: - Correct answer-1. the number and
quality of substitutes
2. share of income spent of a good directly relates to price elasticity of demand
3. passage of time
more substitutes implies - Correct answer-elastic demand
what does share of income mean? how does it effect price elasticity? - Correct
answer-how much of my wallet do I have to give up?
cars, houses --> elastic
gum, candy --> inelastic (if price change, not a big deal will still buy)
2nd Law of Demand - Correct answer-demand is more responsive to price in the
long run than in the short run.
passage of time:
long run = more ___
short run = more ____ - Correct answer-elastic
inelastic
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, Formula for demand elasticity - Correct answer-Ed = %change Qd / %change P < 0
demand elasticity will always be (neg/pos) due to - Correct answer-neg; the
downward sloping nature of the demand curve
if price increases, qd will... - Correct answer-decrease
(vice versa)
how to measure percent changes? - Correct answer-new - old / old
from the equation, when do you know it is elastic demand? - Correct answer-Ed < -
1
big/small = Qd sensitive
from the equation, when do you know it is inelastic demand? - Correct answer--
1<Ed <0
the given % change in p results in a smaller % change in Qd
from the equation, when do you know it is unit elastic? - Correct answer-Ed=1
a given % change in p results in the same % change in Qd
for a linear demand function... - Correct answer-slope is constant, but Ed changes
T/F
slope and elasticity are the same thing - Correct answer-False
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Answers Graded A+
relatively flat graph indicates
steep one indicates - Correct answer-small change in price will cause a huge
change in quantity demanded
even with a very large price increase, Qd will only fall a small amount
elasticity - Correct answer-the sensitivity between 2 variables
price elasticity of demand - Correct answer-the sensitivity of the change in the qd
of a good in response to a change in the price of the good
demand is elastic when... - Correct answer-the qd is relatively responsive to a
change in the products own price
demand is inelastic when... - Correct answer-the qd is relatively unresponsive to
changes in price
elastic goods? - Correct answer-goods with many substitutes, specific brand of
cereal
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,inelastic goods - Correct answer-gas, college tuition, no good substitutes, cigs,
toilet paper, life saving drugs
determinants of price elasticity of demand: - Correct answer-1. the number and
quality of substitutes
2. share of income spent of a good directly relates to price elasticity of demand
3. passage of time
more substitutes implies - Correct answer-elastic demand
what does share of income mean? how does it effect price elasticity? - Correct
answer-how much of my wallet do I have to give up?
cars, houses --> elastic
gum, candy --> inelastic (if price change, not a big deal will still buy)
2nd Law of Demand - Correct answer-demand is more responsive to price in the
long run than in the short run.
passage of time:
long run = more ___
short run = more ____ - Correct answer-elastic
inelastic
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, Formula for demand elasticity - Correct answer-Ed = %change Qd / %change P < 0
demand elasticity will always be (neg/pos) due to - Correct answer-neg; the
downward sloping nature of the demand curve
if price increases, qd will... - Correct answer-decrease
(vice versa)
how to measure percent changes? - Correct answer-new - old / old
from the equation, when do you know it is elastic demand? - Correct answer-Ed < -
1
big/small = Qd sensitive
from the equation, when do you know it is inelastic demand? - Correct answer--
1<Ed <0
the given % change in p results in a smaller % change in Qd
from the equation, when do you know it is unit elastic? - Correct answer-Ed=1
a given % change in p results in the same % change in Qd
for a linear demand function... - Correct answer-slope is constant, but Ed changes
T/F
slope and elasticity are the same thing - Correct answer-False
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