Question 1

The cross price elasticity of demand for substitute goods is:

Accepted Answer

A)  negative. 
B)  positive. 
C)  equal to 1. 
D)  positive only for normal goods. 
A)  negative. 
B)  positive. 
C)  equal to 1. 
D)  positive only for normal goods.

Question 2

Explain why there is a total revenue test for the price elasticity of demand, but there is no total revenue test for price elasticity of supply.

Accepted Answer

The total revenue test for the price ela

Question 3

If the percentage change in quantity demanded divided by the percentage change in price is:

Accepted Answer

A)  positive, demand is price elastic. 
B)  negative, demand is price inelastic. 
C)  less than 1 (absolute value), demand is price elastic. 
D)  greater than 1 (absolute value), demand is price elastic. 
A)  positive, demand is price elastic. 
B)  negative, demand is price inelastic. 
C)  less than 1 (absolute value), demand is price elastic. 
D)  greater than 1 (absolute value), demand is price elastic.

Question 4

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:

Accepted Answer

A)  inferior goods. 
B)  superior goods. 
C)  substitute goods. 
D)  complementary goods. 
A)  inferior goods. 
B)  superior goods. 
C)  substitute goods. 
D)  complementary goods.

Question 5

The Demand for Bungalow Bob's Bagels
  
-(Exhibit: The Demand for Bungalow Bob's Bagels) Demand is unit price elastic between:

Accepted Answer

A)  $0.30 and $0.40. 
B)  $0.40 and $0.50. 
C)  $0.50 and $0.60. 
D)  $0.60 and $0.70. 
A)  $0.30 and $0.40. 
B)  $0.40 and $0.50. 
C)  $0.50 and $0.60. 
D)  $0.60 and $0.70.

Question 6

The cross price elasticity of demand for complements is:

Accepted Answer

A)  negative. 
B)  positive. 
C)  equal to 1. 
D)  positive only for normal goods. 
A)  negative. 
B)  positive. 
C)  equal to 1. 
D)  positive only for normal goods.

Question 7

The Demand for Bungalow Bob's Bagels
  
-(Exhibit: The Demand for Bungalow Bob's Bagels) Total revenue remains unchanged if the price ________ from ________.

Accepted Answer

A)  decreases; $0.50 to $0.40 
B)  decreases; $0.60 to $0.50 
C)  decreases; $0.70 to $0.60 
D)  increases; $0.60 to $0.70 
A)  decreases; $0.50 to $0.40 
B)  decreases; $0.60 to $0.50 
C)  decreases; $0.70 to $0.60 
D)  increases; $0.60 to $0.70

Question 8

When the price of a good goes up, quantity demanded will always go down, but total revenue could go up, go down, or stay the same.

Accepted Answer

A) True 
 B)False

Question 9

If the absolute value of price elasticity is greater than 1, this means the demand curve in that region is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unit price elastic. 
D)  upward sloping. 
A)  price elastic. 
B)  price inelastic. 
C)  unit price elastic. 
D)  upward sloping.

Question 10

If the price of a good is increased by 15 percent and the quantity demanded falls by 20 percent, the price elasticity of demand is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unit price elastic. 
D)  normal. 
A)  price elastic. 
B)  price inelastic. 
C)  unit price elastic. 
D)  normal.

Question 11

-(Exhibit: Nonlinear Demand Curve) The values for quantity demanded along this nonlinear demand curve are given by the formula Q = 24/P. It:

Accepted Answer

A)  exhibits decreasing price elasticity as the price falls in $1 increments from a price of $12 to $2. 
B)  exhibits increasing price elasticity as the price falls in $1 increments from a price of $12 to $2. 
C)  exhibits unit price elasticity throughout. 
D)  does not fit with the law of demand. 
A)  exhibits decreasing price elasticity as the price falls in $1 increments from a price of $12 to $2. 
B)  exhibits increasing price elasticity as the price falls in $1 increments from a price of $12 to $2. 
C)  exhibits unit price elasticity throughout. 
D)  does not fit with the law of demand.

Question 12

If someone did not regard health care as very important, often using home remedies and other substitutes, his or her demand curve for health care would most likely be ________ over the relevant range of prices for health care.

Accepted Answer

A)  more price elastic 
B)  more price inelastic 
C)  horizontal 
D)  vertical 
A)  more price elastic 
B)  more price inelastic 
C)  horizontal 
D)  vertical

Question 13

Give the definitions for goods that are substitutes or complements. Discuss and explain their cross price elasticity of demand.

Accepted Answer

Substitute goods are products that can b

Question 14

-(Exhibit: Demand for Macintosh Computers) The change in the firm's total revenue resulting from a change in price from P to T suggests that demand is:

Accepted Answer

A)  nonelastic. 
B)  price elastic. 
C)  price inelastic. 
D)  unit price elastic. 
A)  nonelastic. 
B)  price elastic. 
C)  price inelastic. 
D)  unit price elastic.

Question 15

If the president of a university decides to increase tuition in order to cover the increase in operating costs, do you think this policy would succeed? Why or why not? Explain in a short essay.

Accepted Answer

The success of the policy to increase tu

Question 16

If the University of Michigan increases the price of football tickets, it will result in increasing revenues if the price elasticity of demand is

Accepted Answer

A)  price inelastic. 
B)  price elastic. 
C)  equal to -1. 
D)  equal to -1.8. 
A)  price inelastic. 
B)  price elastic. 
C)  equal to -1. 
D)  equal to -1.8.

Question 17

Calculating percentage changes relative to the average value of each variable between two points is:

Accepted Answer

A)  slope elasticity. 
B)  arc elasticity. 
C)  median elasticity. 
D)  differential elasticity. 
A)  slope elasticity. 
B)  arc elasticity. 
C)  median elasticity. 
D)  differential elasticity.

Question 18

Price elasticity of demand is the responsiveness of quantity demanded to changes in price.

Accepted Answer

A) True 
 B)False

Question 19

The cross price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61. If the price of Pepsi falls by 10 percent in a period, how will that affect the demand for Coke in that period, all other things unchanged?

Accepted Answer

A)  The demand for Coke will increase due to the income effect. 
B)  The demand for Coke will increase by 6.1 percent. 
C)  The demand for Coke will fall by 6.1 percent. 
D)  The demand for Coke will fall by 0.61 percent. 
A)  The demand for Coke will increase due to the income effect. 
B)  The demand for Coke will increase by 6.1 percent. 
C)  The demand for Coke will fall by 6.1 percent. 
D)  The demand for Coke will fall by 0.61 percent.

Question 20

Johnson's Income and Expenditures
Quantity Purchased per Month
  
-(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for magazines is:

Accepted Answer

A)  negative. 
B)  0. 
C)  greater than 0 but less than 1. 
D)  1. 
A)  negative. 
B)  0. 
C)  greater than 0 but less than 1. 
D)  1.

Exam 5: Elasticity

The cross price elasticity of demand for substitute goods is:

Explain why there is a total revenue test for the price elasticity of demand, but there is no total revenue test for price elasticity of supply.

If the percentage change in quantity demanded divided by the percentage change in price is:

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:

The Demand for Bungalow Bob's Bagels -(Exhibit: The Demand for Bungalow Bob's Bagels) Demand is unit price elastic between:

The cross price elasticity of demand for complements is:

The Demand for Bungalow Bob's Bagels -(Exhibit: The Demand for Bungalow Bob's Bagels) Total revenue remains unchanged if the price ________ from ________.

When the price of a good goes up, quantity demanded will always go down, but total revenue could go up, go down, or stay the same.

If the absolute value of price elasticity is greater than 1, this means the demand curve in that region is:

If the price of a good is increased by 15 percent and the quantity demanded falls by 20 percent, the price elasticity of demand is:

-(Exhibit: Nonlinear Demand Curve) The values for quantity demanded along this nonlinear demand curve are given by the formula Q = 24/P. It:

If someone did not regard health care as very important, often using home remedies and other substitutes, his or her demand curve for health care would most likely be ________ over the relevant range of prices for health care.

Give the definitions for goods that are substitutes or complements. Discuss and explain their cross price elasticity of demand.

-(Exhibit: Demand for Macintosh Computers) The change in the firm's total revenue resulting from a change in price from P to T suggests that demand is:

If the president of a university decides to increase tuition in order to cover the increase in operating costs, do you think this policy would succeed? Why or why not? Explain in a short essay.

If the University of Michigan increases the price of football tickets, it will result in increasing revenues if the price elasticity of demand is

Calculating percentage changes relative to the average value of each variable between two points is:

Price elasticity of demand is the responsiveness of quantity demanded to changes in price.

The cross price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61. If the price of Pepsi falls by 10 percent in a period, how will that affect the demand for Coke in that period, all other things unchanged?

Johnson's Income and Expenditures Quantity Purchased per Month -(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for magazines is:

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

Filters

The Demand for Bungalow Bob's Bagels -(Exhibit: The Demand for Bungalow Bob's Bagels) Total revenue remains unchanged if the price from .