Question 1

The price elasticity of demand for new cars is 1.2. Hence, a 10 percent price increase will

Accepted Answer

A)  decrease the quantity of new cars demanded by 1.2 percent. 
B)  increase consumer expenditure on new cars by 1.2 percent. 
C)  decrease the quantity of new cars demanded by 12 percent. 
D)  increase consumer expenditure on new cars by 12 percent. 
A)  decrease the quantity of new cars demanded by 1.2 percent. 
B)  increase consumer expenditure on new cars by 1.2 percent. 
C)  decrease the quantity of new cars demanded by 12 percent. 
D)  increase consumer expenditure on new cars by 12 percent.

Question 2

The income elasticity of demand for bicycles is +10, which implies that bicycles are

Accepted Answer

A)  an inferior good. 
B)  a normal good. 
C)  a substitute good for motorbikes. 
D)  a complement good for motorbikes. 
A)  an inferior good. 
B)  a normal good. 
C)  a substitute good for motorbikes. 
D)  a complement good for motorbikes.

Question 3

The income elasticity of demand is defined as the percentage change in

Accepted Answer

A)  the quantity demanded resulting from a given percentage change in price. 
B)  income divided by the percentage change in quantity demanded. 
C)  the movement along the demand curve resulting from a change in income. 
D)  the quantity demanded divided by the percentage change in income. 
A)  the quantity demanded resulting from a given percentage change in price. 
B)  income divided by the percentage change in quantity demanded. 
C)  the movement along the demand curve resulting from a change in income. 
D)  the quantity demanded divided by the percentage change in income.

Question 4

-Which of the following leads a good to have a high elasticity of supply? I. The good must be produced using unique resources.
II) The good is produced using commonly available resources.

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  I and II 
D)  neither I nor II

Question 5

The price elasticity of demand for wheat is 0.42. A drought cuts the supply of wheat. What will happen to the farmers' total revenue?

Accepted Answer

A)  The total revenue will increase. 
B)  The total revenue will decrease. 
C)  The total revenue will not change. 
D)  There is not enough information to determine what happens to the total revenue. 
A)  The total revenue will increase. 
B)  The total revenue will decrease. 
C)  The total revenue will not change. 
D)  There is not enough information to determine what happens to the total revenue.

Question 6

Which of the following statements is FALSE?

Accepted Answer

A)  Goods or services that have few close substitutes generally have a less elastic demand. 
B)  Goods or services for which a greater proportion of income is spent on the item generally have a more elastic demand. 
C)  A narrowly defined good or service generally has a less elastic demand. 
D)  The longer the time that has elapsed since a price change, the more elastic the demand. 
A)  Goods or services that have few close substitutes generally have a less elastic demand. 
B)  Goods or services for which a greater proportion of income is spent on the item generally have a more elastic demand. 
C)  A narrowly defined good or service generally has a less elastic demand. 
D)  The longer the time that has elapsed since a price change, the more elastic the demand.

Question 7

Which of the following goods would have the smallest elasticity of demand?

Accepted Answer

A)  Exxon brand premium unleaded gasoline 
B)  insulin sold to diabetics 
C)  an education at Harvard Law School sold to recent college graduates 
D)  a bottle of Bayer Aspirin sold to someone without a headache 
A)  Exxon brand premium unleaded gasoline 
B)  insulin sold to diabetics 
C)  an education at Harvard Law School sold to recent college graduates 
D)  a bottle of Bayer Aspirin sold to someone without a headache

Question 8

A product is likely to have a price elasticity of demand that exceeds 1 when

Accepted Answer

A)  its price falls. 
B)  the percentage of income spent on it decreases. 
C)  it is a necessity. 
D)  it has close substitutes. 
A)  its price falls. 
B)  the percentage of income spent on it decreases. 
C)  it is a necessity. 
D)  it has close substitutes.

Question 9

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________.

Accepted Answer

A)  cross; positive 
B)  income; positive 
C)  income; negative 
D)  cross; negative 
A)  cross; positive 
B)  income; positive 
C)  income; negative 
D)  cross; negative

Question 10

As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is income ________; for Mary, hockey tickets are ________ good.

Accepted Answer

A)  elastic; a normal 
B)  inelastic; a normal 
C)  elastic; an inferior 
D)  inelastic; an inferior 
A)  elastic; a normal 
B)  inelastic; a normal 
C)  elastic; an inferior 
D)  inelastic; an inferior

Question 11

The price elasticity of demand is always positive, as is the price elasticity of supply. Is the cross elasticity of demand always positive? Explain your answer.

Accepted Answer

No, the cross elasticity of demand is no

Question 12

On a straight-line downward-sloping demand curve, the maximum elasticity of demand occurs

Accepted Answer

A)  at its vertical intercept. 
B)  at its midpoint. 
C)  at its horizontal intercept. 
D)  where it intersects the supply curve. 
A)  at its vertical intercept. 
B)  at its midpoint. 
C)  at its horizontal intercept. 
D)  where it intersects the supply curve.

Question 13

Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative. Lowering the price on shirts will ________ the demand for pants because shirts and pants are ________.

Accepted Answer

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

Question 14

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.

Accepted Answer

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

Question 15

If a product has very few substitutes, demand elasticity is likely to be

Accepted Answer

A)  1. 
B)  elastic. 
C)  infinitely elastic. 
D)  inelastic. 
A)  1. 
B)  elastic. 
C)  infinitely elastic. 
D)  inelastic.

Question 16

Demand is inelastic when a price ________ results in total revenue ________.

Accepted Answer

A)  rise; decreasing 
B)  fall; increasing 
C)  rise, increasing 
D)  fall, remaining the same 
A)  rise; decreasing 
B)  fall; increasing 
C)  rise, increasing 
D)  fall, remaining the same

Question 17

In 2012, Canadian farmers did not suffer from drought conditions that affected the United States, but they did enjoy the higher corn prices. Canadian farmers reacted to the higher price by planting more corn. Suppose that the price of corn increased by 30 percent and the Canadian farmers increased the quantity of corn they supply by 20 percent. The supply of corn is

Accepted Answer

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

Question 18

The demand for food in poor countries is

Accepted Answer

A)  inelastic and more inelastic than in rich countries. 
B)  inelastic but more elastic than in rich countries. 
C)  elastic but less elastic than in rich countries. 
D)  elastic and more elastic than in rich countries. 
A)  inelastic and more inelastic than in rich countries. 
B)  inelastic but more elastic than in rich countries. 
C)  elastic but less elastic than in rich countries. 
D)  elastic and more elastic than in rich countries.

Question 19

Suppose the quantity of gasoline is measured in gallons and the price of gasoline is measured in dollars. The price elasticity of demand is 0.67. If the price of gasoline was now measured in cents rather than dollars, the price elasticity of demand would now be

Accepted Answer

A)  0.0067. 
B)  0.67. 
C)  6.7. 
D)  67.0. 
A)  0.0067. 
B)  0.67. 
C)  6.7. 
D)  67.0.

Question 20

If a fall in the price of good A increases the quantity demanded of good B,

Accepted Answer

A)  A and B are substitutes. 
B)  A and B are complements. 
C)  A is a substitute for B, but B is a complement to A. 
D)  B is a substitute for A, but A is a complement to B. 
A)  A and B are substitutes. 
B)  A and B are complements. 
C)  A is a substitute for B, but B is a complement to A. 
D)  B is a substitute for A, but A is a complement to B.

Exam 4: Elasticity

The price elasticity of demand for new cars is 1.2. Hence, a 10 percent price increase will

The income elasticity of demand for bicycles is +10, which implies that bicycles are

The income elasticity of demand is defined as the percentage change in

-Which of the following leads a good to have a high elasticity of supply? I. The good must be produced using unique resources. II) The good is produced using commonly available resources.

The price elasticity of demand for wheat is 0.42. A drought cuts the supply of wheat. What will happen to the farmers' total revenue?

Which of the following statements is FALSE?

Which of the following goods would have the smallest elasticity of demand?

A product is likely to have a price elasticity of demand that exceeds 1 when

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________.

As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is income ________; for Mary, hockey tickets are ________ good.

The price elasticity of demand is always positive, as is the price elasticity of supply. Is the cross elasticity of demand always positive? Explain your answer.

On a straight-line downward-sloping demand curve, the maximum elasticity of demand occurs

Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative. Lowering the price on shirts will ________ the demand for pants because shirts and pants are ________.

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.

If a product has very few substitutes, demand elasticity is likely to be

Demand is inelastic when a price ________ results in total revenue ________.

The demand for food in poor countries is

Suppose the quantity of gasoline is measured in gallons and the price of gasoline is measured in dollars. The price elasticity of demand is 0.67. If the price of gasoline was now measured in cents rather than dollars, the price elasticity of demand would now be

If a fall in the price of good A increases the quantity demanded of good B,

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

Bus rides and canned soup are inferior goods, so the elasticity of demand is .

As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is income ; for Mary, hockey tickets are good.

Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative. Lowering the price on shirts will the demand for pants because shirts and pants are .

Demand is inelastic when a price results in total revenue .