1. If the price elasticity of demand is equal to 1, then demand is unit elastic.
True
2. The income elasticity of demand is defined as the percentage change in quantity demanded divided by
the percentage change in income.
False
3. Rent-control laws dictate a minimum rent that landlords may charge tenants.
True
4. Price controls are usually enacted when policymakers believe that the market price of a good or service
is unfair to buyers or sellers.
True
5. An increase in the price of a substitute good will shift the demand curve for a good to the right.
True
6. At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers
want
to sell.
True
7. Prices are inefficient rationing devices.
False
8. A linear, downward-sloping demand curve has a constant elasticity but a changing slope.
False
9. Normal goods have negative income elasticities of demand, while inferior goods have positive income
elastici-ties of demand.
False
10. If we observe that when consumers incomes rise by 10%, the quantity demanded of ice cream increases
by 5%, then ice cream is an inferior good.
False
11. A price ceiling set above the equilibrium price causes a surplus in the market.
True
12. A price floor set above the equilibrium price is not binding.
False
13. If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.
True
