Question 1

Demand is more inelastic for luxury goods.

Accepted Answer

A) True 
 B)False

Question 2

If demand is very inelastic,

Accepted Answer

A) The demand curve will be very flat. 
B) The demand curve will be horizontal. 
C) The demand curve will be very steep. 
A) The demand curve will be very flat. 
B) The demand curve will be horizontal. 
C) The demand curve will be very steep.

Question 3

The formula for the elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 4

- 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. 
C) Point C has a greater price elasticity of demand. 
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. 
C) Point C has a greater price elasticity of demand.

Question 5

If demand is elastic,then

Accepted Answer

A) An increase in price will reduce total revenue. 
B) An increase in price will increase total revenue. 
C) A decrease in price will reduce total revenue. 
A) An increase in price will reduce total revenue. 
B) An increase in price will increase total revenue. 
C) A decrease in price will reduce total revenue.

Question 6

If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10,and gasoline prices rise by 18 percent,then SUV sales should,ceteris paribus,

Accepted Answer

A) Fall by 1.8 percent. 
B) Fall by 18 percent. 
C) Rise by 1.8 percent. 
A) Fall by 1.8 percent. 
B) Fall by 18 percent. 
C) Rise by 1.8 percent.

Question 7

If demand is inelastic,a reduction in price will lead to a drop in total revenue.

Accepted Answer

A) True 
 B)False

Question 8

The In The News article "Play Station 3 Sales More Than Double after Price Cut" indicated that

Accepted Answer

A) The percentage change in price was greater than the percentage change in quantity demanded. 
B) The percentage change in quantity demanded was greater than the percentage change in price. 
C) The demand for the Play Station 3 consoles was inelastic. 
A) The percentage change in price was greater than the percentage change in quantity demanded. 
B) The percentage change in quantity demanded was greater than the percentage change in price. 
C) The demand for the Play Station 3 consoles was inelastic.

Question 9

If demand is elastic,a price reduction will lead to an increase in total revenue.

Accepted Answer

A) True 
 B)False

Question 10

The price elasticity number for necessities will be greater than 1.

Accepted Answer

A) True 
 B)False

Question 11

If demand is price-elastic,then

Accepted Answer

A) The elasticity number E is greater than 1. 
B) The elasticity number E is less than 1. 
C) The elasticity number E is equal to 1. 
A) The elasticity number E is greater than 1. 
B) The elasticity number E is less than 1. 
C) The elasticity number E is equal to 1.

Question 12

In the article "After iPhone Price Cut,Sales Are Up by 200 Percent,"

Accepted Answer

A) The demand for iPhones is inelastic. 
B) The survey of quantity demanded after a price change for the iPhones showed that iPhones are an inferior good. 
C) The demand for iPhones is highly elastic. 
A) The demand for iPhones is inelastic. 
B) The survey of quantity demanded after a price change for the iPhones showed that iPhones are an inferior good. 
C) The demand for iPhones is highly elastic.

Question 13

Price elasticity of demand refers to

Accepted Answer

A) How responsive producers are to a change in the cost of production. 
B) How sensitive buyers are to a change in price. 
C) How buyers respond to a change in income. 
A) How responsive producers are to a change in the cost of production. 
B) How sensitive buyers are to a change in price. 
C) How buyers respond to a change in income.

Question 14

When demand is elastic,the absolute number for price elasticity will be

Accepted Answer

A) Greater than 0. 
B) Less than 1. 
C) Greater than 1. 
A) Greater than 0. 
B) Less than 1. 
C) Greater than 1.

Question 15

If the price of Good X falls and total revenue rises,then

Accepted Answer

A) Demand for Good X is inelastic. 
B) Demand for Good X is unitary elastic. 
C) Demand for Good X is elastic. 
A) Demand for Good X is inelastic. 
B) Demand for Good X is unitary elastic. 
C) Demand for Good X is elastic.

Question 16

-In the $80 to $40 price range in Figure 20.1,demand is

Accepted Answer

A) Perfectly price-elastic. 
B) Price-inelastic. 
C) Unitary elastic. 
A) Perfectly price-elastic. 
B) Price-inelastic. 
C) Unitary elastic.

Question 17

MP3 players and MP3 files are complementary goods.The cross-price elasticity of demand between MP3 players and MP3 files is expected to be

Accepted Answer

A) Positive. 
B) Negative. 
C) Equal to zero. 
A) Positive. 
B) Negative. 
C) Equal to zero.

Question 18

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. 
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.

Question 19

If the price elasticity of demand is 0.6,then a 10 percent increase in the price of the good will lead to a ________ in the quantity demanded.

Accepted Answer

A) 6 percent increase 
B) 6 percent decrease 
C) 0.6 percent increase. 
A) 6 percent increase 
B) 6 percent decrease 
C) 0.6 percent increase.

Question 20

Explain why the concept of price elasticity of demand is important to government when deciding which goods to tax in order to raise government tax revenues

Accepted Answer

Policy makers will choose which products

Exam 20: Elasticity

Demand is more inelastic for luxury goods.

If demand is very inelastic,

The formula for the elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

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

If demand is elastic,then

If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10,and gasoline prices rise by 18 percent,then SUV sales should,ceteris paribus,

If demand is inelastic,a reduction in price will lead to a drop in total revenue.

The In The News article "Play Station 3 Sales More Than Double after Price Cut" indicated that

If demand is elastic,a price reduction will lead to an increase in total revenue.

The price elasticity number for necessities will be greater than 1.

If demand is price-elastic,then

In the article "After iPhone Price Cut,Sales Are Up by 200 Percent,"

Price elasticity of demand refers to

When demand is elastic,the absolute number for price elasticity will be

If the price of Good X falls and total revenue rises,then

-In the $80 to $40 price range in Figure 20.1,demand is

MP3 players and MP3 files are complementary goods.The cross-price elasticity of demand between MP3 players and MP3 files is expected to be

When demand is inelastic

If the price elasticity of demand is 0.6,then a 10 percent increase in the price of the good will lead to a ________ in the quantity demanded.

Explain why the concept of price elasticity of demand is important to government when deciding which goods to tax in order to raise government tax revenues

Economics: the Core Issues Appendix: Using Graphs

The Us Economy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand Appendix: the Keynesian Cross

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice Appendix: Indifference Curves

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty Glossary Index Reference Tables

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