Which of the following is an example of price elasticity of demand? A. Banana farmers enjoyed higher prices when the demand for bananas increased B. When the price of bananas increased by 5 percent and nothing else changed, the quantity of bananas demanded decreased by 2 perc C. Richer people buy fewer bananas than poorer people D. When the price of bananas increased by 5 percent and incomes slumped, banana sales decreased by 5 percent. Which of the following statements describes a perfectly inelastic demand? A. Walgreens does not find any change in the number of people buying chlorthalidone after a 7 percent rise in its price B. Iprefer taking the subway to work rather than driving because of high fuel prices C. The government is promoting generic drugs that are much cheaper. D. A large number of youngsters buy roses from Colombian rose-growers before Valentine's Day

Question

Which of the following is an example of price elasticity of demand? A. Banana farmers enjoyed higher prices when the demand for bananas increased B. When the price of bananas increased by 5 percent and nothing else changed, the quantity of bananas demanded decreased by 2 perc C. Richer people buy fewer bananas than poorer people D. When the price of bananas increased by 5 percent and incomes slumped, banana sales decreased by 5 percent. Which of the following statements describes a perfectly inelastic demand? A. Walgreens does not find any change in the number of people buying chlorthalidone after a 7 percent rise in its price B. Iprefer taking the subway to work rather than driving because of high fuel prices C. The government is promoting generic drugs that are much cheaper. D. A large number of youngsters buy roses from Colombian rose-growers before Valentine's Day

Answer 1

For the first question, the correct answer is B. When the price of bananas increased by 5 percent and nothing else changed, the quantity of bananas demanded decreased by 2 percent. This is an example of price elasticity of demand, which measures the responsiveness of the quantity demanded of a good to a change in its price. In this case, the percentage change in quantity demanded (2 percent) is less than the percentage change in price (5 percent), indicating that the demand for bananas is inelastic.For the second question, the correct answer is A. Walgreens does not find any change in the number of people buying chlorthalidone after a 7 percent rise in its price. This describes a perfectly inelastic demand, where the quantity demanded does not change at all in response to a change in price. In this case, the demand for chlorthalidone is perfectly inelastic because the quantity demanded remains constant despite the 7 percent increase in price.

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