question archive 1)True or False: The flatter the demand curve passing through a given point, the less elastic the demand curve at that point

1)True or False: The flatter the demand curve passing through a given point, the less elastic the demand curve at that point

Subject:EconomicsPrice:4.88 Bought3

1)True or False: The flatter the demand curve passing through a given point, the less elastic the demand curve at that point.

2)To finance increased security at airports, a $20 per passenger tax is levied on airline tickets. The tax will increase the price of a ticket by $20

A. if the demand for air travel is perfectly elastic.

B. if the demand for air travel is unit elastic.

C. if the supply of air travel is unit elastic.

D. if the supply of air travel is perfectly elastic.

3)American Airlines increases the price of a round-trip ticket between RDU airport and LaGuardia airport in New York City. Other things being equal, the increase in airfares on this route will increase total revenue taken in if

A. the demand for travel on the route is inelastic.

B. the demand for travel on the route is elastic.

C. the demand for travel on the route is unit elastic.

D. the supply of travel for the route is inelastic.

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1)Answer: False

Elasticity of demand measures the change in quantity demanded over the change in price. Remember that price in on the y-axis and quantity demanded on the x-axis. This means the elasticity of demand is inversely correlate to the slop of the demand curve at at point since the slope of the demand curve measures change in price over change in quantity demanded. Thus, the flatter the demand curve (lower slope), the higher the elasticity of demand is at that point.

2)

The correct answer is A. if the demand for air travel is perfectly elastic.

  • This is because, if the demand for air travel is perfectly elastic, then consumers will be willing to buy the same number of airfare tickets regardless by how much the price increases.

3)

The correct answer to the given question is option A. the demand for travel on the route is inelastic.

The demand elasticity for a good or service is usually determined by dividing the percentage change in quantity demanded with percentage change in its price. If the percentage decrease in quantity demanded for round-trip tickets between RDU and LaGuardia airports is less than the percentage increase in the price of ticket, then the total revenue for the airfare on this route will increase with the increase in airfare. Such demand for air tickets is said to be inelastic where the magnitude of price elasticity of demand is less than 1.