Question 1

If a good has an elastic demand, then:

Accepted Answer

A)  a small percentage change in price will cause a larger percentage change in quantity demanded.
B)  a small percentage change in price will cause virtually no change in quantity demanded.
C)  a large percentage change in price will cause a smaller change in quantity demanded.
D)  any percentage change in price will cause an almost immediate response in quantity demanded.E) B) and C)
F) A) and B)

Question 2

Suppose the price of a calculator is $18 and the quantity demanded is 90. When the price increases to $22, the quantity demanded drops to 70. Using the mid-point method, what is the price elasticity of demand for calculators?

Accepted Answer

A)  −1.25
B)  −25 percent
C)  −20 percent
D)  −25E) B) and D)
F) A) and D)

Question 3

Assuming price elasticity of demand is reported as an absolute value, a good with unit elastic demand has an elasticity:

Accepted Answer

A)  between zero and one.
B)  greater than one.
C)  less than one, but greater than zero.
D)  equal to one.E) All of the above
F) C) and D)

Question 4

Considering the concept of cross-price elasticity, if two goods are substitutes:

Accepted Answer

A)  an increase in the price of one causes a decrease in the demand for the other.
B)  a decrease in the price of one causes an increase in the demand of the other.
C)  an increase in the price of one causes an increase in the demand for the other.
D)  a decrease in the price of one has no effect on the demand for the other.E) None of the above
F) A) and D)

Question 5

The demand for a movie ticket is likely _____ price elastic than the demand for a Broadway show ticket because a movie ticket _____.

Accepted Answer

A)  less; requires a smaller portion of one's income
B)  more; requires a smaller portion of one's income
C)  less; has fewer available substitutes
D)  more; has fewer available substitutesE) A) and C)
F) A) and B)

Question 6

Income elasticity of demand describes:

Accepted Answer

A)  how much the quantity demanded changes in response to a change in consumers' incomes.
B)  which way the demand curve shifts in response to a change in price.
C)  how much the quantity demanded changes in response to a change in price.
D)  how quickly the market will change in response to a change in consumers' incomes.E) A) and B)
F) A) and C)

Question 7

Suppose price increases from $7.00 to $13.00. Using the mid-point formula, what is the percentage change in price?

Accepted Answer

A)  −0.6 = −60 percent
B)  0.6 = 60 percent
C)  0.7 = 70 percent
D)  1.30 = 130 percentE) B) and C)
F) B) and D)

Question 8

Suppose the price elasticity of demand for eggs is −0.27. Therefore, an increase in the price of eggs will cause:

Accepted Answer

A)  a decrease in egg suppliers' total revenue.
B)  an increase in the demand for eggs.
C)  an increase in egg suppliers' total revenue.
D)  an increase in the quantity demand of eggs.E) C) and D)
F) A) and C)

Question 9

Suppose the price elasticity of demand for eggs is −0.27. Thus, −0.27 is:

Accepted Answer

A)  the percentage change in the quantity demanded of eggs when the price of eggs increases by one percent.
B)  the size of the shift in the demand for eggs when the price of eggs changes by one percent.
C)  the size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price fluctuation.
D)  the percentage change in the price of eggs when the quantity demanded of eggs increases by one percent.E) B) and D)
F) B) and C)

Question 10

Suppose when the price of pizza goes from $8 to $12 per pie, production increases from 2,500 pies to 4,000 pies per month. Using the mid-point method, what is the percentage change in price?

Accepted Answer

A)  40 percent
B)  46 percent
C)  50 percent
D)  33 percentE) B) and D)
F) None of the above

Question 11

Suppose the price of butter increases by 5 percent and the amount of margarine purchased increases by 25 percent. What is the cross-price elasticity of demand between these two goods?

Accepted Answer

A)  0.2
B)  5
C)  1.0
D)  −5.0E) A) and D)
F) A) and C)

Question 12

Consider a market in which price is initially $2 and rises to $6. If we know total revenue fell as a result of this price change, then we also know that the _____ effect outweighed the _____ effect, and the market is more likely to be represented by _____.

Accepted Answer

A)  price; quantity; Graph A
B)  quantity; price; Graph A
C)  price; quantity; Graph B
D)  quantity; price; Graph BE) None of the above
F) A) and B)

Question 13

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _____ demand, meaning the percentage change in quantity demanded will be _____ than the percentage change in price.

Accepted Answer

A)  elastic; greater
B)  inelastic; greater
C)  elastic; less
D)  inelastic; lessE) C) and D)
F) B) and D)

Question 14

A tavern is likely to have a _____ price elasticity of supply than an antiques dealer due to _____.

Accepted Answer

A)  more elastic; availability of inputs
B)  less elastic; availability of inputs
C)  less elastic; a longer adjustment time
D)  less elastic; a shorter adjustment timeE) A) and B)
F) A) and C)

Question 15

The demand for spring break vacations is _____ price elastic than the demand for textbooks because vacations _____.

Accepted Answer

A)  less; have more available substitutes
B)  more; have less available substitutes
C)  less; are more of a luxury
D)  more; are more of a luxuryE) A) and B)
F) A) and D)

Question 16

Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What happened to total revenue and what does this indicate?

Accepted Answer

A)  Total revenue decreased from $54 to $50, indicating that demand is inelastic.
B)  Total revenue decreased from $54 to $50, indicating that demand is elastic.
C)  Total revenue increased from $50 to $54, indicating that demand is inelastic.
D)  Total revenue increased from $50 to $54, indicating that demand is elastic.E) A) and C)
F) B) and D)

Question 17

Suppose quantity supplied increases from 16 to 24 units. Using the mid-point formula, what is the percentage change in quantity supplied?

Accepted Answer

A)  −40 percent
B)  0.4 percent
C)  4 percent
D)  40 percentE) A) and B)
F) A) and C)

Question 18

When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee:

Accepted Answer

A)  is a necessity.
B)  has a negative income elasticity of demand.
C)  has an income elasticity of demand greater than zero but less than one.
D)  is a normal good.E) A) and C)
F) B) and C)

Question 19

A linear demand curve:

Accepted Answer

A)  has a constant elasticity.
B)  will be more elastic when price is low and more inelastic when price is high.
C)  must be either perfectly inelastic or perfectly elastic.
D)  has a constant slope.E) A) and D)
F) C) and D)

Question 20

Coke and Pepsi, both cola producers, likely have a _____ cross-price elasticity of demand than that of Coke and bananas.

Accepted Answer

A)  less elastic
B)  smaller
C)  more negative
D)  more elasticE) A) and B)
F) A) and C)

Exam 4: Elasticity

Assuming price elasticity of demand is reported as an absolute value, a good with unit elastic demand has an elasticity:

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A tavern is likely to have a _____ price elasticity of supply than an antiques dealer due to _____.

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Income elasticity of demand describes:

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The demand for a movie ticket is likely _____ price elastic than the demand for a Broadway show ticket because a movie ticket _____.

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Suppose the price of a calculator is $18 and the quantity demanded is 90. When the price increases to $22, the quantity demanded drops to 70. Using the mid-point method, what is the price elasticity of demand for calculators?

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Suppose quantity supplied increases from 16 to 24 units. Using the mid-point formula, what is the percentage change in quantity supplied?

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Consider a market in which price is initially $2 and rises to $6. If we know total revenue fell as a result of this price change, then we also know that the _____ effect outweighed the _____ effect, and the market is more likely to be represented by _____.

Correct AnswerverifiedShow Answer

Suppose when the price of pizza goes from $8 to $12 per pie, production increases from 2,500 pies to 4,000 pies per month. Using the mid-point method, what is the percentage change in price?

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When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee:

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Suppose the price elasticity of demand for eggs is −0.27. Therefore, an increase in the price of eggs will cause:

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A linear demand curve:

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If a good has an elastic demand, then:

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Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What happened to total revenue and what does this indicate?

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Suppose price increases from $7.00 to $13.00. Using the mid-point formula, what is the percentage change in price?

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Coke and Pepsi, both cola producers, likely have a _____ cross-price elasticity of demand than that of Coke and bananas.

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The demand for spring break vacations is _____ price elastic than the demand for textbooks because vacations _____.

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Suppose the price of butter increases by 5 percent and the amount of margarine purchased increases by 25 percent. What is the cross-price elasticity of demand between these two goods?

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Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _____ demand, meaning the percentage change in quantity demanded will be _____ than the percentage change in price.

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Suppose the price elasticity of demand for eggs is −0.27. Thus, −0.27 is:

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Considering the concept of cross-price elasticity, if two goods are substitutes:

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A tavern is likely to have a _ price elasticity of supply than an antiques dealer due to _.

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The demand for a movie ticket is likely _ price elastic than the demand for a Broadway show ticket because a movie ticket _.

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Consider a market in which price is initially $2 and rises to $6. If we know total revenue fell as a result of this price change, then we also know that the ___ effect outweighed the _ effect, and the market is more likely to be represented by ___.

Correct Answer
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The demand for spring break vacations is _ price elastic than the demand for textbooks because vacations _.

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Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _ demand, meaning the percentage change in quantity demanded will be _ than the percentage change in price.

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