Question 1

For demand to be elastic,

Accepted Answer

A)  the percentage change in quantity demanded must be greater than the associated percentage change in price. 
B)  demand must change with a change in price. 
C)  the percentage change in quantity demanded must be less than the associated percentage change in price. 
D)  the percentage change in quantity demanded must be equal to the associated percentage change in price. 
E)  quantity demanded must change with a change in price. 
A)  the percentage change in quantity demanded must be greater than the associated percentage change in price. 
B)  demand must change with a change in price. 
C)  the percentage change in quantity demanded must be less than the associated percentage change in price. 
D)  the percentage change in quantity demanded must be equal to the associated percentage change in price. 
E)  quantity demanded must change with a change in price.

Question 2

Does a price floor result in a shortage or a surplus? Why?

Accepted Answer

A price floor results in a sur

Question 3

Along a downward-sloping, straight-line demand curve, total revenue is greatest where demand is

Accepted Answer

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

Question 4

The elasticity of demand is lower for European vehicles than for U.S. vehicles. Why do auto dealers offer substantially fewer discounts for European vehicles than for U.S. vehicles?

Accepted Answer

When the elasticity of demand is higher,

Question 5

Suppose demand is a straight line as follows: Qd = 100 - 2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Accepted Answer

100 - 2(41) = 18 = Q

Question 6

Explain why economists care about the price elasticity of demand. What does it tell us?

Accepted Answer

The price elasticity of demand tells us

Question 7

If a price ceiling is imposed on a good, then a shortage for that good will occur.

Accepted Answer

A) True 
 B)False

Question 8

A price floor that is effective results in a surplus.

Accepted Answer

A) True 
 B)False

Question 9

One of the results of a price ceiling is a decline in the quality of the good sold.

Accepted Answer

A) True 
 B)False

Question 10

In the case of a price floor,

Accepted Answer

A)  there will be a shortage. 
B)  there is no need for government to buy any excess. 
C)  government must require producers to increase production to meet demand. 
D)  there is a redistribution of income from consumers to producers. 
E)  supply decreases. 
A)  there will be a shortage. 
B)  there is no need for government to buy any excess. 
C)  government must require producers to increase production to meet demand. 
D)  there is a redistribution of income from consumers to producers. 
E)  supply decreases.

Question 11

A horizontal demand curve is

Accepted Answer

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

Question 12

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

Accepted Answer

A)  It cannot be determined from the information given. 
B)  .02 
C)  25 
D)  50 
E)  .04 
A)  It cannot be determined from the information given. 
B)  .02 
C)  25 
D)  50 
E)  .04

Question 13

The price elasticity of demand measures how much price changes given a change in demand.

Accepted Answer

A) True 
 B)False

Question 14

Give four instances that cause price elasticity to vary. Explain.

Accepted Answer

Substitutability. The easier it is to fi

Question 15

The price elasticity of demand is expressed as the

Accepted Answer

A)  percentage change in the quantity demanded divided by the percentage change in income. 
B)  percentage change in the price divided by the percentage change in the quantity demanded. 
C)  percentage change in the quantity demanded divided by the percentage change in the price. 
D)  percentage change in supply divided by the percentage change in demand. 
E)  absolute change in the quantity demanded divided by the absolute change in the price. 
A)  percentage change in the quantity demanded divided by the percentage change in income. 
B)  percentage change in the price divided by the percentage change in the quantity demanded. 
C)  percentage change in the quantity demanded divided by the percentage change in the price. 
D)  percentage change in supply divided by the percentage change in demand. 
E)  absolute change in the quantity demanded divided by the absolute change in the price.

Question 16

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Accepted Answer

A) True 
 B)False

Question 17

If demand is perfectly inelastic, then the

Accepted Answer

A)  quantity demanded does not change when price changes. 
B)  demand curve is nonexistent. 
C)  elasticity of demand is -1. 
D)  elasticity of demand is 1. 
E)  demand curve is a horizontal line. 
A)  quantity demanded does not change when price changes. 
B)  demand curve is nonexistent. 
C)  elasticity of demand is -1. 
D)  elasticity of demand is 1. 
E)  demand curve is a horizontal line.

Question 18

A perfectly inelastic demand curve has a price elasticity

Accepted Answer

A)  equal to zero. 
B)  that varies. 
C)  equal to 1. 
D)  less than 1. 
E)  of infinity. 
A)  equal to zero. 
B)  that varies. 
C)  equal to 1. 
D)  less than 1. 
E)  of infinity.

Question 19

Supply may be elastic, unit elastic, or inelastic.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about the price elasticity of demand is true?

Accepted Answer

A)  Slope and elasticity measure the same things. 
B)  Price elasticity of demand varies depending on how price and quantity are measured. 
C)  It is important to know whether the price elasticity of demand is a positive or negative number. 
D)  The slope of a demand curve does not tell us the price elasticity of demand. 
E)  Price elasticity is the same everywhere along a demand curve of any shape. 
A)  Slope and elasticity measure the same things. 
B)  Price elasticity of demand varies depending on how price and quantity are measured. 
C)  It is important to know whether the price elasticity of demand is a positive or negative number. 
D)  The slope of a demand curve does not tell us the price elasticity of demand. 
E)  Price elasticity is the same everywhere along a demand curve of any shape.

Exam 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

For demand to be elastic,

Does a price floor result in a shortage or a surplus? Why?

Along a downward-sloping, straight-line demand curve, total revenue is greatest where demand is

The elasticity of demand is lower for European vehicles than for U.S. vehicles. Why do auto dealers offer substantially fewer discounts for European vehicles than for U.S. vehicles?

Suppose demand is a straight line as follows: Qd = 100 - 2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Explain why economists care about the price elasticity of demand. What does it tell us?

If a price ceiling is imposed on a good, then a shortage for that good will occur.

A price floor that is effective results in a surplus.

One of the results of a price ceiling is a decline in the quality of the good sold.

In the case of a price floor,

A horizontal demand curve is

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

The price elasticity of demand measures how much price changes given a change in demand.

Give four instances that cause price elasticity to vary. Explain.

The price elasticity of demand is expressed as the

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

If demand is perfectly inelastic, then the

A perfectly inelastic demand curve has a price elasticity

Supply may be elastic, unit elastic, or inelastic.

Which of the following statements about the price elasticity of demand is true?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters

Suppose demand is a straight line as follows: Q_d = 100 - 2P. Calculate the price elasticity of demand between the prices of $41 and $43.