Question 1

If the price of a good increases from $3 to $4, and the quantity demand remains unchanged, then the demand is

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  somewhat elastic. 
D)  infinite. 
A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  somewhat elastic. 
D)  infinite.

Question 2

A decrease in the supply of sugar increases the price of sugar from $1.00 a packet to $1.25 a packet. The quantity decreases from 100 packets a day to 80 packets a day. The price elasticity of demand of sugar is ________.

Accepted Answer

A)  0.75 
B)  0.5 
C)  1.0 
D)  1.25 
A)  0.75 
B)  0.5 
C)  1.0 
D)  1.25

Question 3

The income elasticity of demand for movies in the United States is 3.41. If people's incomes decrease by 1 percent, what is the decrease in the quantity of movies demanded?

Accepted Answer

The income elasticity of demand = (perce

Question 4

Joe's monthly income increases from $1,000 to $2,000. As a result, he decreases the number of his fast food meals from 20 to 5 per month. To Joe, are fast-food meals a normal or an inferior good? What kind of elasticity can tell the answer? Explain.

Accepted Answer

Fast-food meals are an inferio

Question 5

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Calculate Jennika's price elasticity of demand for pork if she decreases her consumption by 4 percent.

Accepted Answer

A)  1.25 
B)  1 
C)  0.75 
D)  0.66 
A)  1.25 
B)  1 
C)  0.75 
D)  0.66

Question 6

If the price elasticity of demand for a product equals 1, as its price rises the

Accepted Answer

A)  quantity demanded increases. 
B)  total revenue increases. 
C)  quantity demanded does not change. 
D)  total revenue does not change. 
A)  quantity demanded increases. 
B)  total revenue increases. 
C)  quantity demanded does not change. 
D)  total revenue does not change.

Question 7

Suppose a 10 percent increase in the price of textbooks decreases the quantity demanded by 20 percent. The elasticity of demand for textbooks is

Accepted Answer

A)  0.2. 
B)  2.0. 
C)  5.0. 
D)  10.0. 
A)  0.2. 
B)  2.0. 
C)  5.0. 
D)  10.0.

Question 8

Specialty chocolate bars with a high cocoa content have been drawing a lot of attention in gourmet circles in 2008 but the price of cocoa beans has increased more than 44 percent in this time period. In response to the increase in the price of cocoa beans, Rogue Chocolatier has increased the price of their gourmet chocolate bars by 20 percent. Rogue observes the quantity of their bars sold decreased by 15 percent. Based on this news clip, what does the price elasticity of demand for gourmet chocolate bars equal?

Accepted Answer

A)  0.75 
B)  1.25 
C)  1 
D)  0.66 
A)  0.75 
B)  1.25 
C)  1 
D)  0.66

Question 9

-The figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will ________, and if the price rises from $3 to $6 a bag, total revenue will ________.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease

Question 10

A fall in the price of X from $12 to $8 causes an increase in the quantity of Y demanded from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?

Accepted Answer

A)  0.5 
B)  -0.5 
C)  2 
D)  -2 
A)  0.5 
B)  -0.5 
C)  2 
D)  -2

Question 11

-In the above figure, which demand curve illustrates perfectly elastic demand?

Accepted Answer

A)  G 
B)  H 
C)  I 
D)  J 
A)  G 
B)  H 
C)  I 
D)  J

Question 12

If a good is inferior, its income elasticity will be

Accepted Answer

A)  0. 
B)  1.0. 
C)  negative. 
D)  positive. 
A)  0. 
B)  1.0. 
C)  negative. 
D)  positive.

Question 13

The demand for food is most elastic in countries

Accepted Answer

A)  with low income levels. 
B)  with intermediate income levels. 
C)  with high income levels. 
D)  that are highly urbanized. 
A)  with low income levels. 
B)  with intermediate income levels. 
C)  with high income levels. 
D)  that are highly urbanized.

Question 14

If the long-run supply of rice is perfectly elastic, then

Accepted Answer

A)  as people's incomes rise, the quantity of rice supplied decreases. 
B)  as the price of corn falls, the quantity of rice demanded decreases. 
C)  in the long run, a large rise in the price of rice causes no change in the quantity of rice supplied. 
D)  in the long run, an increase in the demand for rice leaves the price of rice unchanged. 
A)  as people's incomes rise, the quantity of rice supplied decreases. 
B)  as the price of corn falls, the quantity of rice demanded decreases. 
C)  in the long run, a large rise in the price of rice causes no change in the quantity of rice supplied. 
D)  in the long run, an increase in the demand for rice leaves the price of rice unchanged.

Question 15

To say that turnips are inferior goods means that the income elasticity

Accepted Answer

A)  is definitely greater than 1. 
B)  is definitely between 0 and 1. 
C)  is positive but could be greater than or less than (or equal to) 1. 
D)  is negative. 
A)  is definitely greater than 1. 
B)  is definitely between 0 and 1. 
C)  is positive but could be greater than or less than (or equal to) 1. 
D)  is negative.

Question 16

The price elasticity of demand is defined as the magnitude of the

Accepted Answer

A)  change in quantity demanded divided by the change in price. 
B)  change in price divided by the change in quantity demanded. 
C)  percentage change in quantity demanded divided by the percentage change in price. 
D)  percentage change in price divided by the percentage change in quantity demanded. 
A)  change in quantity demanded divided by the change in price. 
B)  change in price divided by the change in quantity demanded. 
C)  percentage change in quantity demanded divided by the percentage change in price. 
D)  percentage change in price divided by the percentage change in quantity demanded.

Question 17

-The above figure shows the demand curve for movie rentals from Blockbuster. Which of the following is true?

Accepted Answer

A)  Consumer expenditure on movie rentals will always increase whenever Blockbuster lowers its price. 
B)  Blockbuster will receive more total revenue if it charges $4.00 per movie rental rather than $3.00. 
C)  The price elasticity of demand for movie rentals falls as Blockbuster raises its price. 
D)  The demand for movie rentals is more price inelastic at $1.00 than it is at $1.50. 
A)  Consumer expenditure on movie rentals will always increase whenever Blockbuster lowers its price. 
B)  Blockbuster will receive more total revenue if it charges $4.00 per movie rental rather than $3.00. 
C)  The price elasticity of demand for movie rentals falls as Blockbuster raises its price. 
D)  The demand for movie rentals is more price inelastic at $1.00 than it is at $1.50.

Question 18

For many goods, the price elasticity of demand increases over time because

Accepted Answer

A)  people's incomes tend to increase over time. 
B)  inflation increases all prices and incomes over time. 
C)  the ability to find substitutes for a good whose price has risen increases over time. 
D)  None of the above answers is correct. 
A)  people's incomes tend to increase over time. 
B)  inflation increases all prices and incomes over time. 
C)  the ability to find substitutes for a good whose price has risen increases over time. 
D)  None of the above answers is correct.

Question 19

On most days the price of a rose is $1 and 80 roses are purchased. On Valentine's Day the demand increases so that the price of a rose rises to $2 and 320 roses are purchased. Therefore, the price elasticity of

Accepted Answer

A)  demand for roses is about 1.8. 
B)  demand for roses is about 0.55. 
C)  supply of roses is about 1.8. 
D)  supply of roses is about 0.55. 
A)  demand for roses is about 1.8. 
B)  demand for roses is about 0.55. 
C)  supply of roses is about 1.8. 
D)  supply of roses is about 0.55.

Question 20

Which demand is more price elastic: The demand for all personal computers or the demand for Dell computers? Explain your answer.

Accepted Answer

The demand for Dell computers is more el

Exam 4: Elasticity

If the price of a good increases from $3 to $4, and the quantity demand remains unchanged, then the demand is

A decrease in the supply of sugar increases the price of sugar from $1.00 a packet to $1.25 a packet. The quantity decreases from 100 packets a day to 80 packets a day. The price elasticity of demand of sugar is ________.

The income elasticity of demand for movies in the United States is 3.41. If people's incomes decrease by 1 percent, what is the decrease in the quantity of movies demanded?

Joe's monthly income increases from $1,000 to $2,000. As a result, he decreases the number of his fast food meals from 20 to 5 per month. To Joe, are fast-food meals a normal or an inferior good? What kind of elasticity can tell the answer? Explain.

If the price elasticity of demand for a product equals 1, as its price rises the

Suppose a 10 percent increase in the price of textbooks decreases the quantity demanded by 20 percent. The elasticity of demand for textbooks is

-The figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will ________, and if the price rises from $3 to $6 a bag, total revenue will ________.

A fall in the price of X from $12 to $8 causes an increase in the quantity of Y demanded from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?

-In the above figure, which demand curve illustrates perfectly elastic demand?

If a good is inferior, its income elasticity will be

The demand for food is most elastic in countries

If the long-run supply of rice is perfectly elastic, then

To say that turnips are inferior goods means that the income elasticity

The price elasticity of demand is defined as the magnitude of the

-The above figure shows the demand curve for movie rentals from Blockbuster. Which of the following is true?

For many goods, the price elasticity of demand increases over time because

On most days the price of a rose is $1 and 80 roses are purchased. On Valentine's Day the demand increases so that the price of a rose rises to $2 and 320 roses are purchased. Therefore, the price elasticity of

Which demand is more price elastic: The demand for all personal computers or the demand for Dell computers? Explain your answer.

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

-The figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will , and if the price rises from $3 to $6 a bag, total revenue will .