How strongly buyers answer a price move

Civics & Economics · Economics · ages 15-16

Name ______________________ Date ____________

An elasticity of 0.4 is which kind?
- Elastic
- Inelastic
- Unit elastic
Tickets rise 10 percent and sales fall 20 percent. What is elasticity?
- 2
- 0.5
- 20
When demand is inelastic, a price rise raises total revenue.
Circle one: True False
A bus company raises fares on an elastic route. What happens to takings?
- Takings rise sharply
- Takings stay exactly flat
- Takings fall as riders leave
Price rises 5 percent and quantity falls 15 percent. Type the elasticity.
Answer: ______________
Why is insulin inelastic while one cereal brand is elastic?
- Insulin has no substitute and fills a medical need
- Cereal is a medical need
- Insulin has fifty identical rivals
A drug has elasticity 0.1 and its price rises 10 percent. Type the percent fall in quantity.
Answer: ______________
A student labels potatoes at one stall among fifty as inelastic. What is the error?
- They are perfectly inelastic like a life-saving drug
- Elasticity cannot apply to food
- They are near perfectly elastic, since any rise wipes out sales

Answer key

For grown-ups. Fold this page away before handing over the rest.

Inelastic · Below 1 counts as inelastic, so buyers barely react.
2 · Divide 20 by 10 and ignore the minus sign: elasticity is 2.
True · Buyers mostly stay, so the higher price wins.
Takings fall as riders leave · Elastic riders leave in droves, so revenue falls despite higher fares.
3 · Divide 15 by 5: elasticity is 3, which is elastic.
Insulin has no substitute and fills a medical need · Few substitutes plus need means buyers stay whatever the price.
1 · Multiply 0.1 by 10: quantity falls 1 percent, barely moving.
They are near perfectly elastic, since any rise wipes out sales · Identical neighbours give buyers endless substitutes, so sales vanish.