2. Which of the following statements is true about the price elasticity of demand? A) The price elasticity of demand for a good is generally higher in the long run than in the short run. B) The demand for a good with a price elasticity of demand of zero is highly responsive to price changes. C) As the number of substitutes for a product increases, the price elasticity of demand for that good decreases. D) If the budget share of a particular good in a consumer’s bundle increases, the price elasticity of demand for that good is likely to decrease. 3. Sandra consumes two goods–tea and coffee. Her demand for tea is inelastic while her demand for coffee is elastic. If there is an increase in the price of both tea and coffee, ________. A) Sandra’s revenue on both tea and coffee is likely to decrease B) Sandra’s expenditure on both tea and coffee is likely to increase C) Sandra’s expenditure on tea will increase and her expenditure on coffee will decrease D) Sandra’s expenditure on coffee will increase and her expenditure on tea will decrease 4. Which of the following statements is true? A) A fall in the incomes of all consumers is likely to lead to an increase in the quantity demanded of pens. B) A decrease in the quantity of land under coffee cultivation will shift the supply curve of coffee to the left. C) A rise in labor costs due to wage demands by labor unions is likely to lead to a right shift in the supply curve of cotton. D) An increase in the cost of production leading to an increase in the price of cars is likely to cause the demand curve for cars to shift to the left.