e of the above.36.The price of gasoline increases by 20% and remains at the new higher level. Which of the following statements is true?a.Initially after the price change the price elasticity of demand will be less elastic than it will be a few years after the price change.b.Initially after the price change the price elasticity of demand will be more elastic than it will be a few years after the price change.c.Price elasticity of demand for gasoline will not be affected by the change in the price of gasoline over the long run.d. Demand for gasoline will increase after people adjust to the new higher price.37.The price elasticity of demand is thea.ratio of the change in price to the change in quantity demanded.b.ratio of the change in quantity demanded to the change in price.c.ratio of the percentage change in price to the percentage change in quantity demanded.d.ratio of the percentage change in quantity demanded to the percentage change in price.38.As you move down a straight-line downward-sloping demand curve, the price elasticity of demanda.becomes more elastic.b.becomes more inelastic.c.remains constant because the slope is constant.d.may become more or less elastic depending on the slope of the demand curve.39.Assume you earn $75,000 a year and your favorite entertainment magazine costs you $25 a year. Your demand for the sports magazine is likely to bea.inelastic.b.elastic.c.perfectly elastic.d.perfectly inelastic.40.If the income elasticity of good Z is -1.5, then good Z isa.an inferior good.b.a normal good.c.a luxury good.e. an income-neutral good.Short Answer1. (5pts.) Consider the following information on a group of buyers and sellers.Buyer 1 has marginal benefits for each of three goods equal to $4, $6 and $9.Buyer 2 has marginal benefits for each of three goods equal to $3, $8 and $9.Seller 1 has marginal costs for each of three goods equal to $1, $3 and $7Seller 2 has marginal costs for each of three goods equal to $4, $5 a...
