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 its price.
Recognize that a life-saving machine is a necessity and lacks close substitutes, meaning consumers will continue to purchase it even if the price changes.
Consider that when a product is essential and has no substitutes, the quantity demanded is less sensitive to price changes, indicating a small price elasticity of demand.
Contrast this with goods that have many substitutes, where consumers can easily switch to alternatives if the price rises, leading to a larger price elasticity of demand.
Conclude that the life-saving machine, due to its necessity and lack of substitutes, will have a small price elasticity of demand.
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