Economists Use the Concept of Price Elasticity of Demand to Measure

question 162

Multiple Choice

Economists use the concept of price elasticity of demand to measure how much:

• A)sellers respond to changes in the price of the good
• B)worse off consumers are when the price of the good rises
• C)demand responds to changes in buyers' incomes
• D)buyers respond to changes in the price of the good

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Definitions:

Purely Competitive Market

A market structure characterized by many buyers and sellers, all of whom are selling identical products, allowing no single participant to influence market prices.

Profit-maximizing Combination

The selection of production inputs and output levels that allow a firm to achieve the highest possible profit given market conditions.

Marginal Product

The additional output that results from using one more unit of input, holding all other inputs constant in the production process.

Purely Competitive Market

A market structure characterized by many buyers and sellers, homogenous products, and free entry and exit, leading to price determination by supply and demand forces.