Tackle the Test: Free-Response Questions

1. Question

   Draw a correctly labeled graph of a perfectly inelastic demand curve.

   
   

   
   

   1. What is the price elasticity of demand for this good?

      
      
   
   

   2. What is the slope of the demand curve for this good?

      
      
   
   

   3. Is this good more likely to be a luxury or a necessity? Explain.

      
      
   
   

   Rubric for FRQ 1 (5 points)

   

   1 point: A graph with “Price” (or “P”) on the vertical axis, “Quantity” (or “Q”) on the horizontal axis, and a vertical line labeled “Demand” (or “D”)

   1 point: Zero

   1 point: Infinite or undefined

   1 point: Necessity

   1 point: Since you have to have a necessity (such as a life-saving medicine), you do not change the quantity you purchase when the price changes.

2. Question

   Draw a correctly labeled graph illustrating a demand curve that is a straight line and is neither perfectly elastic nor perfectly inelastic.

   
   

   
   

   1. On your graph, indicate the half of the demand curve along which demand is elastic.

      
      
   
   

   2. In the elastic range, how will an increase in price affect total revenue? Explain. (4 points)

      
      
   
   

   Rubric for FRQ 2 (4 points)

   

   1 point: A graph with “Price” (or “ P ”) on the vertical axis, “Quantity” (or “ Q ”) on the horizontal axis, and a downward-sloping, straight line labeled “Demand” (or “ D ”)

   1 point: The top half of the demand curve is labeled “elastic.”

   1 point: An increase in price will decrease total revenue.

   1 point: Because the negative quantity effect of the price increase is greater than the positive price effect of the price increase