Question 1

If the cross elasticity of demand between Jeep Cherokees and Chevy Lumina Vans is 1.55, then the two vehicles are not substitutes in the eyes of car buyers.

Accepted Answer

A) True 
 B)False

Question 2

What kind of elasticity is relevant when you are trying to figure out how a price cut by the burger shop next door will affect the demand for your pizza? Explain.

Accepted Answer

The cross elasticity of demand is the re

Question 3

-The demand curve in the figure above illustrates a product whose demand has a price elasticity of demand equal to

Accepted Answer

A)  zero at all prices. 
B)  infinity. 
C)  one at all prices. 
D)  a different amount at different prices. 
A)  zero at all prices. 
B)  infinity. 
C)  one at all prices. 
D)  a different amount at different prices.

Question 4

Producers' total revenue will decrease if

Accepted Answer

A)  income increases and the good is a normal good. 
B)  the price rises and demand is elastic. 
C)  the price rises and demand is inelastic. 
D)  income falls and the good is an inferior good. 
A)  income increases and the good is a normal good. 
B)  the price rises and demand is elastic. 
C)  the price rises and demand is inelastic. 
D)  income falls and the good is an inferior good.

Question 5

Pizza Hut pizza has more close substitutes than does food in general. The price elasticity of demand for Pizza Hut pizza is ________ the price elasticity of demand for food in general.

Accepted Answer

A)  not comparable to 
B)  greater than 
C)  less than 
D)  the same as 
A)  not comparable to 
B)  greater than 
C)  less than 
D)  the same as

Question 6

If goods A and B are complements, then

Accepted Answer

A)  the cross elasticity of demand between A and B is negative. 
B)  the cross elasticity of demand between A and B is positive. 
C)  their income elasticities of demand are both greater than 1. 
D)  their income elasticities of demand are both less than 1. 
A)  the cross elasticity of demand between A and B is negative. 
B)  the cross elasticity of demand between A and B is positive. 
C)  their income elasticities of demand are both greater than 1. 
D)  their income elasticities of demand are both less than 1.

Question 7

Demand is perfectly inelastic when

Accepted Answer

A)  shifts in the supply curve results in no change in price. 
B)  the good in question has perfect substitutes. 
C)  shifts of the supply curve result in no change in quantity demanded. 
D)  shifts of the supply curve result in no change in the total revenue from the quantity sold. 
A)  shifts in the supply curve results in no change in price. 
B)  the good in question has perfect substitutes. 
C)  shifts of the supply curve result in no change in quantity demanded. 
D)  shifts of the supply curve result in no change in the total revenue from the quantity sold.

Question 8

The demand for a good is more price elastic

Accepted Answer

A)  if closer substitutes are available. 
B)  if the good is a necessity rather than a luxury. 
C)  if the share of the good in the average consumer's budget is smaller. 
D)  in the short run than in the long run. 
A)  if closer substitutes are available. 
B)  if the good is a necessity rather than a luxury. 
C)  if the share of the good in the average consumer's budget is smaller. 
D)  in the short run than in the long run.

Question 9

A supply curve that is horizontal reflects a supply that

Accepted Answer

A)  is elastic. 
B)  is inelastic. 
C)  is unit elastic. 
D)  has a zero elasticity. 
A)  is elastic. 
B)  is inelastic. 
C)  is unit elastic. 
D)  has a zero elasticity.

Question 10

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price elastic, she should

Accepted Answer

A)  lower her price to increase the demand and shift the demand curve rightward. 
B)  raise her price because she knows that the quantity demanded will also increase. 
C)  raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. 
D)  lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price. 
A)  lower her price to increase the demand and shift the demand curve rightward. 
B)  raise her price because she knows that the quantity demanded will also increase. 
C)  raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. 
D)  lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price.

Question 11

A local pizzeria charges $10 for a pizza. The owner of the pizzeria wants to increase the company's total revenue. A recent market research shows that the price elasticity of demand for his pizza is about 1.5. Should the pizzeria lower or raise the price? Explain your answer.

Accepted Answer

The pizzeria should lower the price. Sin

Question 12

Many younger people eat peanut butter AND jelly, whereas many older people eat peanut butter OR jelly. This suggests that the cross elasticity of demand between peanut butter and jelly is

Accepted Answer

A)  negative for youngsters and positive for oldsters. 
B)  positive for youngsters and negative for oldsters. 
C)  negative for youngsters and zero for oldsters. 
D)  positive for youngsters and zero for oldsters. 
A)  negative for youngsters and positive for oldsters. 
B)  positive for youngsters and negative for oldsters. 
C)  negative for youngsters and zero for oldsters. 
D)  positive for youngsters and zero for oldsters.

Question 13

As time passes after a change in the price, the supply of a good or service

Accepted Answer

A)  becomes more elastic. 
B)  becomes less elastic. 
C)  initially becomes more elastic and then becomes less elastic. 
D)  initially becomes less elastic and then becomes more elastic. 
A)  becomes more elastic. 
B)  becomes less elastic. 
C)  initially becomes more elastic and then becomes less elastic. 
D)  initially becomes less elastic and then becomes more elastic.

Question 14

The income elasticity of demand is the percentage change in ________ divided by the percentage change in ________.

Accepted Answer

A)  the price; income 
B)  the quantity demanded; income 
C)  income; the quantity demanded 
D)  income; the price 
A)  the price; income 
B)  the quantity demanded; income 
C)  income; the quantity demanded 
D)  income; the price

Question 15

If the price elasticity is between 0 and 1, demand is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly elastic.

Question 16

For Product X, the income elasticity of demand is -2.56. Which of the following is therefore true?

Accepted Answer

A)  Product X is a necessity. 
B)  Product X is a luxury. 
C)  Product X is an inferior good. 
D)  Product X is a normal good. 
A)  Product X is a necessity. 
B)  Product X is a luxury. 
C)  Product X is an inferior good. 
D)  Product X is a normal good.

Question 17

The cost of basics like milk, bread, potatoes and bananas has jumped in the past year, forcing families to nix luxuries, steer away from organic goods and buy more house brands. What does customer Elize Joseph mean when she said, "You can cut back on buying clothes and shoes, but you can't do that with food; you have to eat"?

Accepted Answer

A)  The price elasticity of demand for food is higher than for clothes. 
B)  The price elasticity of demand for food is lower than for clothes. 
C)  Income elasticity of demand for food is positive. 
D)  Income elasticity of demand for food is negative. 
A)  The price elasticity of demand for food is higher than for clothes. 
B)  The price elasticity of demand for food is lower than for clothes. 
C)  Income elasticity of demand for food is positive. 
D)  Income elasticity of demand for food is negative.

Question 18

Deb's income has just risen from $950 per week to $1,050 per week. As a result, she decides to increase the number of movies she attends each month by 5 percent. Her demand for movies is

Accepted Answer

A)  represented by a vertical line. 
B)  represented by a horizontal line. 
C)  income elastic. 
D)  income inelastic. 
A)  represented by a vertical line. 
B)  represented by a horizontal line. 
C)  income elastic. 
D)  income inelastic.

Question 19

The elasticity of supply equals ________ if the supply curve is vertical.

Accepted Answer

A)  0 
B)  1 
C)  infinity 
D)  -1 
A)  0 
B)  1 
C)  infinity 
D)  -1

Question 20

If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be ________ because total revenue ________ when the price was lowered.

Accepted Answer

A)  elastic; decreased 
B)  elastic; increased 
C)  inelastic; decreased 
D)  inelastic; increased 
A)  elastic; decreased 
B)  elastic; increased 
C)  inelastic; decreased 
D)  inelastic; increased

Exam 4: Elasticity

If the cross elasticity of demand between Jeep Cherokees and Chevy Lumina Vans is 1.55, then the two vehicles are not substitutes in the eyes of car buyers.

What kind of elasticity is relevant when you are trying to figure out how a price cut by the burger shop next door will affect the demand for your pizza? Explain.

-The demand curve in the figure above illustrates a product whose demand has a price elasticity of demand equal to

Producers' total revenue will decrease if

Pizza Hut pizza has more close substitutes than does food in general. The price elasticity of demand for Pizza Hut pizza is ________ the price elasticity of demand for food in general.

If goods A and B are complements, then

Demand is perfectly inelastic when

The demand for a good is more price elastic

A supply curve that is horizontal reflects a supply that

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price elastic, she should

A local pizzeria charges $10 for a pizza. The owner of the pizzeria wants to increase the company's total revenue. A recent market research shows that the price elasticity of demand for his pizza is about 1.5. Should the pizzeria lower or raise the price? Explain your answer.

Many younger people eat peanut butter AND jelly, whereas many older people eat peanut butter OR jelly. This suggests that the cross elasticity of demand between peanut butter and jelly is

As time passes after a change in the price, the supply of a good or service

The income elasticity of demand is the percentage change in ________ divided by the percentage change in ________.

If the price elasticity is between 0 and 1, demand is

For Product X, the income elasticity of demand is -2.56. Which of the following is therefore true?

Deb's income has just risen from $950 per week to $1,050 per week. As a result, she decides to increase the number of movies she attends each month by 5 percent. Her demand for movies is

The elasticity of supply equals ________ if the supply curve is vertical.

If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be ________ because total revenue ________ when the price was lowered.

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 income elasticity of demand is the percentage change in divided by the percentage change in .

If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be because total revenue when the price was lowered.