If the Absolute Value of the Price Elasticity of Demand

question 202

Multiple Choice

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

• A) less then 0.8 in absolute value.
• B) greater than 0.8 in absolute value.
• C) equal to 1 in absolute value.
• D) equal to zero because the DVD of this movie has been out for several years.

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Definitions:

Demand Curve

A graph plotting the quantity of a good that buyers wish to purchase at different price levels, typically sloping downwards from left to right.

Consumer Confidence

A measure of the overall consumer optimism about the state of an economy, reflected through spending and saving behaviors.

Housing Bubble

A temporary condition characterized by an unusual increase in housing prices fueled by demand, speculation, and exuberant spending to the levels that income levels do not support.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, usually downward sloping to the right indicating inverse relationship between price and quantity demanded.