1.The demand for a product tends to be price inelastic if:

A)   few good complements for the product are available.

B)   few good substitutes for the product are available.

C)   people spend a large share of their income on the product.

D)   the population in the market area is large.

2.Gene Bawerk, an economics professor, is lecturing on the factors that influence the price elasticity of demand. He makes the following assertions:

Statement 1: For most goods, demand is more elastic in the long run than the short run.

Statement 2: Demand for a good becomes more elastic when a close substitute for it becomes available on the market.

Are Bawerk’s statements correct?

A)                                        Correct  Incorrect

B)                                        Incorrect       Correct

C)                                        Correct  Correct

D)                                        Incorrect       Incorrect

答案和详解如下：

1.The demand for a product tends to be price inelastic if:

A)   few good complements for the product are available.

B)   few good substitutes for the product are available.

C)   people spend a large share of their income on the product.

D)   the population in the market area is large.

The correct answer was B)    

If a large price change results in a small change in quantity demanded, demand is inelastic. Cigarettes are an example of a good with inelastic demand.

2.Gene Bawerk, an economics professor, is lecturing on the factors that influence the price elasticity of demand. He makes the following assertions:

Statement 1: For most goods, demand is more elastic in the long run than the short run.

Statement 2: Demand for a good becomes more elastic when a close substitute for it becomes available on the market.

Are Bawerk’s statements correct?

Statement 1

Statement 2

A)                                        Correct  Incorrect

B)                                        Incorrect       Correct

C)                                        Correct  Correct

D)                                        Incorrect       Incorrect

The correct answer was C)

Both of these statements are accurate. Price elasticity for most goods is greater in the long run because individuals can make long-term decisions that require different quantities of the good, such as buying more fuel efficient vehicles to use less gasoline. Price elasticity is greater the better the available substitutes because an increase in price will lead more buyers to switch to the substitute products.