Suppose the price elasticity of demand for good air travel is -1.5.  Which of the following is a proper interpretation of the price elasticity of demand.   a For every 1% increase in the price, the quantity of air travel purchased will increase 1.5% b For every 1.5% increase in the price, the quantity of air travel purchased will increase 1% c For every 1% increase in the price, the quantity of air travel purchased will decrease 1.5% d For every 1.5% increase in the price, the quantity of air travel purchased will decrease 1% 2. Suppose that Frank's income increased from $4,000/month to $4,500/month and as a result, the quantity of good X he purchased increased from 15 units/month to 16 units/month. In this case, good X is _____.   a an inferior good b a normal good and a necessity c a normal good and a luxury d none of the above

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Elasticity of Demand and Supply

The elasticity of demand and supply are two important concepts of microeconomics. The elasticity of demand measures the responsiveness of consumers’ demands to the price change, changes in income of consumers, and changes in the price of the related goods. Similarly, the elasticity of supply refers to the proportionate change in the quantity supplied due to the proportionate change in the price. In other words, it can be said that elasticity of supply measures how the quantity of supply changes when the price changes of that particular product.