Question 1

When the percentage change in quantity demanded is less than the percentage change in price,ceteris paribus,

Accepted Answer

A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unitary elastic. 
D) Elasticity is impossible to calculate. 
A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unitary elastic. 
D) Elasticity is impossible to calculate.

Question 2

If two goods are complementary,it means that when the price of one good increases,the demand for the other rises.

Accepted Answer

A) True 
 B)False

Question 3

Supply is very inelastic when

Accepted Answer

A) The quantity supplied changes little when the price increases. 
B) The quantity supplied changes a lot when price increases. 
C) The quantity supplied does not change at all when price increases. 
D) The quantity supplied changes only when demand changes. 
A) The quantity supplied changes little when the price increases. 
B) The quantity supplied changes a lot when price increases. 
C) The quantity supplied does not change at all when price increases. 
D) The quantity supplied changes only when demand changes.

Question 4

Explain under what conditions supply is very inelastic and elastic.

Accepted Answer

Elasticity of supply measures the change

Question 5

When demand is price-inelastic,ceteris paribus,an increase in

Accepted Answer

A) Price leads to lower total revenue. 
B) Total revenue means quantity rises. 
C) Total revenue indicates a reduction in price. 
D) Price leads to greater total revenue. 
A) Price leads to lower total revenue. 
B) Total revenue means quantity rises. 
C) Total revenue indicates a reduction in price. 
D) Price leads to greater total revenue.

Question 6

On a demand curve,demand is more elastic

Accepted Answer

A) At higher prices. 
B) At lower prices. 
C) When demand is unitary. 
D) At the middle price. 
A) At higher prices. 
B) At lower prices. 
C) When demand is unitary. 
D) At the middle price.

Question 7

Suppose the income elasticity of demand for used jet skis is 3.5.If the level of income decreases by 1 percent,the number of used jet skis sold will,ceteris paribus,

Accepted Answer

A) Rise by 0.29 percent. 
B) Rise by 3.5 percent. 
C) Fall by 0.29 percent. 
D) Fall by 3.5 percent. 
A) Rise by 0.29 percent. 
B) Rise by 3.5 percent. 
C) Fall by 0.29 percent. 
D) Fall by 3.5 percent.

Question 8

If the price of cell phones increases by 5 percent and the quantity demanded falls by 2 percent,the absolute value of the price elasticity of demand is

Accepted Answer

A) 5.0. 
B) 0.4. 
C) 2.1. 
D) 5 percent. 
A) 5.0. 
B) 0.4. 
C) 2.1. 
D) 5 percent.

Question 9

The total revenue effect of a movement along a demand curve can best be predicted using the

Accepted Answer

A) Law of diminishing marginal utility. 
B) Price elasticity of demand. 
C) Utility-maximizing rule. 
D) Law of demand. 
A) Law of diminishing marginal utility. 
B) Price elasticity of demand. 
C) Utility-maximizing rule. 
D) Law of demand.

Question 10

Suppose the price of video games falls from $40 to $20 and as a result the quantity demanded of footballs falls from 40,000 to 10,000 per year.The value of the cross-price elasticity of demand is

Accepted Answer

A) 1.80. 
B) 1.00. 
C) 0.83. 
D) 0.56. 
A) 1.80. 
B) 1.00. 
C) 0.83. 
D) 0.56.

Question 11

Suppose the price of soccer shoes decreases by 7 percent and as a result,there is a 12 percent rise in the quantity of shin guards demanded.The value of the cross-price elasticity of demand is

Accepted Answer

A) -1.71 
B) -0.58. 
C) 1.71. 
D) 0.58. 
A) -1.71 
B) -0.58. 
C) 1.71. 
D) 0.58.

Question 12

You own your business,and your research indicates that the price elasticity of demand for your product is 3.5.What pricing strategies should you follow,and why?

Accepted Answer

Price elasticity is the percentage chang

Question 13

If the demand for cigarettes is inelastic,

Accepted Answer

A) Total revenue will rise if the price of cigarettes rises. 
B) No matter how high the price goes,the quantity demanded will not fall. 
C) Total revenue will fall if the price of cigarettes rises. 
D) A price reduction will actually cause the quantity demanded to fall. 
A) Total revenue will rise if the price of cigarettes rises. 
B) No matter how high the price goes,the quantity demanded will not fall. 
C) Total revenue will fall if the price of cigarettes rises. 
D) A price reduction will actually cause the quantity demanded to fall.

Question 14

Higher prices will increase total revenue if

Accepted Answer

A) Demand is elastic. 
B) Demand is unitary elastic. 
C) Demand is inelastic. 
D) The price elasticity of demand is zero. 
A) Demand is elastic. 
B) Demand is unitary elastic. 
C) Demand is inelastic. 
D) The price elasticity of demand is zero.

Question 15

If the price elasticity of demand for cigarettes is 0.4,

Accepted Answer

A) The demand is elastic. 
B) A 10 percent increase in price will cause quantity demanded to fall by 40 percent. 
C) The demand is inelastic. 
D) A 5 percent decrease in price will cause quantity demanded to rise by 10 percent. 
A) The demand is elastic. 
B) A 10 percent increase in price will cause quantity demanded to fall by 40 percent. 
C) The demand is inelastic. 
D) A 5 percent decrease in price will cause quantity demanded to rise by 10 percent.

Question 16

When demand is inelastic

Accepted Answer

A) The percentage change in price is greater than the percentage change in quantity demanded. 
B) Buyers are very sensitive to changes in price. 
C) The product in demand has many substitute goods. 
D) The percentage change in quantity demanded is greater than the percentage change in price. 
A) The percentage change in price is greater than the percentage change in quantity demanded. 
B) Buyers are very sensitive to changes in price. 
C) The product in demand has many substitute goods. 
D) The percentage change in quantity demanded is greater than the percentage change in price.

Question 17

If the price of Coke rises by 5 percent and the sales of Pepsi go up by 10 percent,we can conclude that

Accepted Answer

A) The sign on the cross-price elasticity will be negative. 
B) Both goods are normal goods. 
C) Both goods are substitute goods because the cross-price elasticity is +0.5. 
D) Both goods are substitute goods because the cross-price elasticity is +2. 
A) The sign on the cross-price elasticity will be negative. 
B) Both goods are normal goods. 
C) Both goods are substitute goods because the cross-price elasticity is +0.5. 
D) Both goods are substitute goods because the cross-price elasticity is +2.

Question 18

Refer to Figure 20.2.Comparing the price elasticity of demand at points A and C,we can say that

Accepted Answer

A) The elasticities are the same because the points are on the same demand curve. 
B) Point A has a greater price elasticity of demand in absolute value. 
C) Point C has a greater price elasticity of demand in absolute value. 
D) Demand elasticity is indeterminate because specific price data are not given. 
A) The elasticities are the same because the points are on the same demand curve. 
B) Point A has a greater price elasticity of demand in absolute value. 
C) Point C has a greater price elasticity of demand in absolute value. 
D) Demand elasticity is indeterminate because specific price data are not given.

Question 19

Ceteris paribus,as the number of substitutes for a good increases,the

Accepted Answer

A) Price elasticity of demand should become smaller. 
B) Price elasticity of demand should become larger. 
C) Cross-price elasticity of demand should become negative. 
D) Income elasticity of demand should become negative. 
A) Price elasticity of demand should become smaller. 
B) Price elasticity of demand should become larger. 
C) Cross-price elasticity of demand should become negative. 
D) Income elasticity of demand should become negative.

Question 20

A grocery store put salt on sale but found that total revenues fell.This can be explained by which of the following?

Accepted Answer

A) The demand for salt is very elastic. 
B) The demand curve for salt is vertical. 
C) The demand for salt is inelastic. 
D) The demand for salt is unitary elastic. 
A) The demand for salt is very elastic. 
B) The demand curve for salt is vertical. 
C) The demand for salt is inelastic. 
D) The demand for salt is unitary elastic.

Exam 20: Elasticity

When the percentage change in quantity demanded is less than the percentage change in price,ceteris paribus,

If two goods are complementary,it means that when the price of one good increases,the demand for the other rises.

Supply is very inelastic when

Explain under what conditions supply is very inelastic and elastic.

When demand is price-inelastic,ceteris paribus,an increase in

On a demand curve,demand is more elastic

Suppose the income elasticity of demand for used jet skis is 3.5.If the level of income decreases by 1 percent,the number of used jet skis sold will,ceteris paribus,

If the price of cell phones increases by 5 percent and the quantity demanded falls by 2 percent,the absolute value of the price elasticity of demand is

The total revenue effect of a movement along a demand curve can best be predicted using the

Suppose the price of video games falls from $40 to $20 and as a result the quantity demanded of footballs falls from 40,000 to 10,000 per year.The value of the cross-price elasticity of demand is

Suppose the price of soccer shoes decreases by 7 percent and as a result,there is a 12 percent rise in the quantity of shin guards demanded.The value of the cross-price elasticity of demand is

You own your business,and your research indicates that the price elasticity of demand for your product is 3.5.What pricing strategies should you follow,and why?

If the demand for cigarettes is inelastic,

Higher prices will increase total revenue if

If the price elasticity of demand for cigarettes is 0.4,

When demand is inelastic

If the price of Coke rises by 5 percent and the sales of Pepsi go up by 10 percent,we can conclude that

Refer to Figure 20.2.Comparing the price elasticity of demand at points A and C,we can say that

Ceteris paribus,as the number of substitutes for a good increases,the

A grocery store put salt on sale but found that total revenues fell.This can be explained by which of the following?

Economics: the Core Issues

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National Income Accounting

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Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

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