Multiple Choice
An increase in the supply of a good will increase the total revenue producers receive if:
4. Elasticity
Elasticity Summary
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A life-saving machine without any close substitutes will tend to have:
A
A small price elasticity of demand
B
A large price elasticity of demand
C
A small price elasticity of supply
D
A large price elasticity of supply
Verified step by step guidance1
Understand the concept of price elasticity of demand, which measures how much the quantity demanded of a good responds to a change in the price of that good.
Recognize that a life-saving machine is a necessity with no close substitutes, meaning consumers will continue to purchase it even if the price changes.
Recall that goods with few or no substitutes tend to have inelastic demand because consumers have limited alternatives.
Identify that inelastic demand is characterized by a small price elasticity of demand, meaning the percentage change in quantity demanded is less than the percentage change in price.
Conclude that a life-saving machine without any close substitutes will have a small price elasticity of demand, as consumers are less sensitive to price changes.
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