Economics Micro & Macro (CliffsAP)

A Graphical Analysis of Elasticity

When a demand curve is perfectly vertical, the demand for that good is inelastic. If the demand curve is horizontal, then
the product is elastic in demand. Figure 2-11 illustrates the inelastic and elastic demand curves.

Figure 2-11

Chapter Review Questions

1. If price increased by 5 percent and quantity supplied increased by 7 percent:
   A. Supply is elastic.
   B. Demand is elastic.
   C. Supply is inelastic.
   D. Demand is inelastic.
   E. Supply is unitary.


2. When income and consumption have a positive relationship, which of the following is true?
   A. The good is inferior.
   B. The good is normal.
   C. The good is complementary.
   D. The good is a substitute.
   E. None of the above.


3. When cross-elasticity of demand is positive, what are the goods in question?
   A. Substitutes
   B. Rivals
   C. Inferior
   D. Negative
   E. Complements

Price

Quantity

Inelastic Demand

Price

Quantity

Elastic Demand

Supply and Demand