AL Econ mc questions

Suppose the market price of a commodity increases by $3 per unit after the imposition of a $5per unit sales tax. This indicates that

A. its elasticity of demand is lower than its elasticity of supply.
B. its elasticity of demand is higher than its elasticity of supply.
C. its demand is inelastic.
D. its supply is inelastic. (1998 Q8)

Why the answer is A?





In an indifference curve analysis of two goods X and Y, when the price of X falls and the quantities purchased of both X and Y increase, holding money income constant, the price elasticity for X is

A. larger than unity.
B. smaller than unity.
C. equal to unity.
D. uncertain. (2000 Q14)

Why the answer is B?





Suppose the traffic flow inside a tunnel is so low that there is no congestion and that the cost of serving an extra car is zero. If the total revenue of the tunnel company is not maximized, at what price elasticity of demand is the company charging the toll?

A. It may be less than 1.
B. It must be less than 1.
C. It may be equal to 1.
D. It must be greater than 1. (2003 Q9)

Why the answer is A?