elasticity measure
For example, if, in response to a 10%
increase in income, the quantity of a good demanded increased by 20%, the
income elasticity of demand would be 20%/10% = 2.
3-8: Cross elasticity of demand
and cross price elasticity of demand measures the responsiveness of the
quantity demand of a good to a change in the price of another good.
It is measured as the percentage change in quantity demanded for
the first good that occurs in response to a percentage change in price of the
second good.
3-9.How can we measure it:
If, for example, in response to a 10%
increase in the price of fuel, the quantity of new cars that are fuel
inefficient demanded decreased by 20%, the cross elasticity of demand would be
-20%/10% = -2.
Multiple choice tests :
1. The price elasticity of demand measures the
nature and degree of the relationship between:
a. Changes in quantity demanded of a
good and changes in its supply.
b. Changes in quantity demanded of a good and
changes in its price.
c. Changes in quantity supply of a good
and changes in its price.
d. Changes in quantity supply of a good and
changes in its quantity demanded.
2. High elasticity of demand is:
a. The small change in price give the same
change in quantity demanded.
b. The small change in price give the big change in
quantity demanded.
c. The big change in price give the big change in
quantity demanded.
d. The big change in price give the small change in
quantity demanded.
3. low elasticity of demand is:
a. The big change in price gives the small
change in quantity demanded.
b. The big change in price gives the big change in
quantity demanded.
c. The small change in price gives the small change
in quantity demanded.
d. The small change in price gives the big change in
quantity demanded.
4. Unity elasticity is the:
a. Big change in price gives the big change in
quantity demanded.
b. Small change in price gives the small change in
quantity demanded.
c. Change in price gives the same change in quantity
demanded.
d. Big change in price gives the small change in quantity
demanded.
5. Cross elasticity of demand measures the
responsiveness of:
a. The quantity demand of a good to a change
in the price of another good.
b. The quantity demand of a good to a change in its price.
c. The quantity demand of a good to a change in the
quantity supply of another good.
d. The quantity supply of a good to a change in the price
of another good.
6. Translate the
following paragraph:-
Consumer Demand
In economic department Zahra’a asked
Sarah about concept of Consumer Demand, Sarah said it means (Study of how
people use their limited means to make purposeful choices, and Assumes that
consumers understand their choices (possibilities) and the prices (opportunity
costs) associated with each choice, and Assumes that consumers consider the
alternatives and choose the one that they like best).
Zahra’a added there are two
Components of Consumer Demand (first Opportunities: which means: What can the
consumer afford? And What are the consumption possibilities? And Summarized by
the budget constraint, second Preferences: which means: What does the
consumer like? And How much does a consumer like a good? And Summarized by the
utility function.