Question 1

-(Exhibit: Demand and Price Elasticity 2) Going from point B to C, the demand curve is:

Accepted Answer

A)  price inelastic. 
B)  unit price elastic. 
C)  price elastic. 
D)  both price elastic and price inelastic. 
A)  price inelastic. 
B)  unit price elastic. 
C)  price elastic. 
D)  both price elastic and price inelastic.

Question 2

The concept of cross price elasticity of demand refers to the:

Accepted Answer

A)  ratio of the percentage change in the quantity demanded of a good at a specific price to the percentage change in the price of a related good. 
B)  ratio of the percentage change in the price of one good to the percentage change in the quantity demanded of a related good at a specific price. 
C)  ratio of the price elasticity of a normal good to the price elasticity of a related good. 
D)  change in income due to a change in the price of a related good. 
A)  ratio of the percentage change in the quantity demanded of a good at a specific price to the percentage change in the price of a related good. 
B)  ratio of the percentage change in the price of one good to the percentage change in the quantity demanded of a related good at a specific price. 
C)  ratio of the price elasticity of a normal good to the price elasticity of a related good. 
D)  change in income due to a change in the price of a related good.

Question 3

List and discuss why two products you buy have price elastic demand. List and discuss why two products you buy have price inelastic demand.

Accepted Answer

Price elastic demand refers to a situati

Question 4

The price elasticity of demand for soft drinks has been estimated to be -0.55. If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacture and bottling), how will that affect total expenditures on soft drinks, all other things unchanged?

Accepted Answer

A)  total expenditures will remain unchanged 
B)  total expenditures will fall 
C)  total expenditures will rise 
D)  people will buy Pepsi instead of Coke 
A)  total expenditures will remain unchanged 
B)  total expenditures will fall 
C)  total expenditures will rise 
D)  people will buy Pepsi instead of Coke

Question 5

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

Accepted Answer

A)  -0.5. 
B)  -1. 
C)  -2. 
D)  greater than 2 (absolute value). 
A)  -0.5. 
B)  -1. 
C)  -2. 
D)  greater than 2 (absolute value).

Question 6

Given an inelastic demand for agricultural output, a decrease in supply will lead to an increase in farm income (taken collectively).

Accepted Answer

A) True 
 B)False

Question 7

An important determinant of the price elasticity of demand is the:

Accepted Answer

A)  time period. 
B)  price of related goods. 
C)  level of technology. 
D)  quantity of the good supplied. 
A)  time period. 
B)  price of related goods. 
C)  level of technology. 
D)  quantity of the good supplied.

Question 8

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

Accepted Answer

A)  0. 
B)  -0.5. 
C)  -1. 
D)  -2. 
A)  0. 
B)  -0.5. 
C)  -1. 
D)  -2.

Question 9

If a good has a price inelastic demand, then which of the following is not likely to be characteristic of this good?

Accepted Answer

A)  The good is a necessity and is relatively unimportant in the household budget. 
B)  There are many substitutes for the good. 
C)  Consumers spend a small percentage of their income on the good. 
D)  Consumers do not have much time to adjust to market changes. 
A)  The good is a necessity and is relatively unimportant in the household budget. 
B)  There are many substitutes for the good. 
C)  Consumers spend a small percentage of their income on the good. 
D)  Consumers do not have much time to adjust to market changes.

Question 10

A price inelastic demand exists if a 10 percent change in the price of a good results in a percentage change (in absolute value terms) in quantity demanded that is:

Accepted Answer

A)  less than 0. 
B)  greater than 0 but less than 10. 
C)  equal to 10. 
D)  greater than 10. 
A)  less than 0. 
B)  greater than 0 but less than 10. 
C)  equal to 10. 
D)  greater than 10.

Question 11

A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for:

Accepted Answer

A)  a home entertainment system to be more price elastic. 
B)  a home entertainment system to be more price inelastic. 
C)  newspapers to be more price elastic. 
D)  both to be equally price elastic. 
A)  a home entertainment system to be more price elastic. 
B)  a home entertainment system to be more price inelastic. 
C)  newspapers to be more price elastic. 
D)  both to be equally price elastic.

Question 12

-(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.25 and $2.00?

Accepted Answer

A)  -4.00 
B)  -5.67 
C)  -9.00 
D)  -17.6 
A)  -4.00 
B)  -5.67 
C)  -9.00 
D)  -17.6

Question 13

The price elasticity of demand for milk has been estimated to be somewhere between -0.49 and -0.63. If a new system of feeding and milking cows yields a 15 percent increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things unchanged?

Accepted Answer

A)  total expenditures will remain unchanged 
B)  total expenditures will fall 
C)  total expenditures will rise 
D)  not enough information is given to answer the question 
A)  total expenditures will remain unchanged 
B)  total expenditures will fall 
C)  total expenditures will rise 
D)  not enough information is given to answer the question

Question 14

A constant price elasticity of demand curve is one whose:

Accepted Answer

A)  slope is the same at every point on the curve. 
B)  price elasticity of demand is the same at every point on the curve. 
C)  quantity is the same at every point on the curve. 
D)  price elasticity of demand and slope are the same at every point on the curve. 
A)  slope is the same at every point on the curve. 
B)  price elasticity of demand is the same at every point on the curve. 
C)  quantity is the same at every point on the curve. 
D)  price elasticity of demand and slope are the same at every point on the curve.

Question 15

Which of the following will lead to a decrease in total revenue?

Accepted Answer

A)  price goes up and demand is perfectly inelastic 
B)  price goes up and demand is price inelastic 
C)  price declines and demand is price elastic 
D)  price increases and demand is price elastic 
A)  price goes up and demand is perfectly inelastic 
B)  price goes up and demand is price inelastic 
C)  price declines and demand is price elastic 
D)  price increases and demand is price elastic

Question 16

The price elasticity of demand for gasoline in the long run has been estimated to be -1.5. If an extended war in the Middle-East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things unchanged?

Accepted Answer

A)  total expenditures would rise 
B)  total expenditures would fall 
C)  total expenditures would remain unchanged 
D)  not enough information is given to answer the question 
A)  total expenditures would rise 
B)  total expenditures would fall 
C)  total expenditures would remain unchanged 
D)  not enough information is given to answer the question

Exam 5: Elasticity

-(Exhibit: Demand and Price Elasticity 2) Going from point B to C, the demand curve is:

The concept of cross price elasticity of demand refers to the:

List and discuss why two products you buy have price elastic demand. List and discuss why two products you buy have price inelastic demand.

The price elasticity of demand for soft drinks has been estimated to be -0.55. If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacture and bottling), how will that affect total expenditures on soft drinks, all other things unchanged?

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

Given an inelastic demand for agricultural output, a decrease in supply will lead to an increase in farm income (taken collectively).

An important determinant of the price elasticity of demand is the:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

If a good has a price inelastic demand, then which of the following is not likely to be characteristic of this good?

A price inelastic demand exists if a 10 percent change in the price of a good results in a percentage change (in absolute value terms) in quantity demanded that is:

A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for:

-(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.25 and $2.00?

The price elasticity of demand for milk has been estimated to be somewhere between -0.49 and -0.63. If a new system of feeding and milking cows yields a 15 percent increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things unchanged?

A constant price elasticity of demand curve is one whose:

Which of the following will lead to a decrease in total revenue?

Welcome to Economics

Demand and Supply

Labor and Financial Markets

Consumer Choices

Cost and Industry Structure

Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly and Antitrust Policy

Environmental Protection and Negative Externalities

Positive Externalities and Public Goods

Poverty and Economic Inequality

Issues in Labor Markets: Unions, Discrimination, Immigration

Information, Risk, and Insurance

Financial Markets

Public Economy

The Macroeconomic Perspective

Economic Growth

Unemployment

Inflation

The International Trade and Capital Flows

The Aggregate Demandaggregate Supply Model

The Keynesian Perspective

The Neoclassical Perspective

Money and Banking

Monetary Policy and Bank Regulation

Exchange Rates and International Capital Flows

Government Budgets and Fiscal Policy

The Impacts of Government Borrowing

Macroeconomic Policy Around the World

International Trade

Globalization and Protectionism

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