Question 1

If a 5 per cent increase in income brings about a 10 per cent decrease in the demand for a good, then the

Accepted Answer

A)  good is an inferior good. 
B)  income elasticity of demand is 0.5. 
C)  income elasticity of demand is 5.0. 
D)  income elasticity of demand is 2.0. 
E)  good is a normal good. 
A)  good is an inferior good. 
B)  income elasticity of demand is 0.5. 
C)  income elasticity of demand is 5.0. 
D)  income elasticity of demand is 2.0. 
E)  good is a normal good. A

Question 2

The income elasticity of demand for skiing trips to Falls Creek is greater than one. Thus a trip to Falls Creek for skiing is ________ good.

Accepted Answer

A)  an inferior 
B)  a price inelastic 
C)  a normal 
D)  a unit elastic 
E)  a price elastic 
A)  an inferior 
B)  a price inelastic 
C)  a normal 
D)  a unit elastic 
E)  a price elastic C

Question 3

You own a small store. Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue. The cashier thinks the price elasticity of demand is ________ and the customer believes the price elasticity of demand is ________.

Accepted Answer

A)  elastic; inelastic 
B)  unit elastic; elastic 
C)  inelastic; inelastic 
D)  elastic; elastic 
E)  inelastic; elastic 
A)  elastic; inelastic 
B)  unit elastic; elastic 
C)  inelastic; inelastic 
D)  elastic; elastic 
E)  inelastic; elastic E

Question 4

Goods that can be produced at a constant or very gently rising opportunity cost have

Accepted Answer

A)  an elastic supply. 
B)  an elastic demand. 
C)  an inelastic demand. 
D)  an inelastic supply. 
E)  a unit elastic demand. 
A)  an elastic supply. 
B)  an elastic demand. 
C)  an inelastic demand. 
D)  an inelastic supply. 
E)  a unit elastic demand.

Question 5

The income elasticity of demand is ________ if the good is ________ good.

Accepted Answer

A)  positive; a substitute 
B)  positive; an inferior 
C)  less than one; an inferior 
D)  negative; a normal 
E)  positive; a normal 
A)  positive; a substitute 
B)  positive; an inferior 
C)  less than one; an inferior 
D)  negative; a normal 
E)  positive; a normal

Question 6

If the cross elasticity of demand for DVD players and DVDs equals -2, then the products are

Accepted Answer

A)  complements. 
B)  normal goods. 
C)  unrelated. 
D)  substitutes. 
E)  inferior goods. 
A)  complements. 
B)  normal goods. 
C)  unrelated. 
D)  substitutes. 
E)  inferior goods.

Question 7

-The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in price?

Accepted Answer

A)  1.0 per cent 
B)  8.2 per cent 
C)  5.0 per cent 
D)  15.5 per cent 
E)  10.5 per cent 
A)  1.0 per cent 
B)  8.2 per cent 
C)  5.0 per cent 
D)  15.5 per cent 
E)  10.5 per cent

Question 8

Perfectly inelastic demand means that consumers

Accepted Answer

A)  will buy a certain quantity, regardless of price. 
B)  decrease their consumption as price rises. 
C)  will buy a huge, almost infinite amount more, if the price falls just a little. 
D)  increase their consumption as price rises. 
E)  are willing to buy any quantity of the good at a given price, but none at higher prices. 
A)  will buy a certain quantity, regardless of price. 
B)  decrease their consumption as price rises. 
C)  will buy a huge, almost infinite amount more, if the price falls just a little. 
D)  increase their consumption as price rises. 
E)  are willing to buy any quantity of the good at a given price, but none at higher prices.

Question 9

Suppose the current price of barley is $70 per tonne and at that price 100,000 tonnes are grown by a Victorian farmer. If the price of barley rises to $80 and quantity supplied increases to 130,000 tonnes then, using the midpoint method, the price elasticity of supply for barley equals

Accepted Answer

A)  1.96. 
B)  13.33. 
C)  26.78. 
D)  zero. 
E)  0.51. 
A)  1.96. 
B)  13.33. 
C)  26.78. 
D)  zero. 
E)  0.51.

Question 10

If the price elasticity of demand for petrol equals 0.3, then an increase in the price of a litre of petrol from $3.70 to $3.90

Accepted Answer

A)  leads to no change in total revenue. 
B)  makes the demand for petrol elastic. 
C)  increases total revenue. 
D)  decreases total revenue. 
E)  Both answers B and D are correct. 
A)  leads to no change in total revenue. 
B)  makes the demand for petrol elastic. 
C)  increases total revenue. 
D)  decreases total revenue. 
E)  Both answers B and D are correct.

Question 11

If the price of beef increased by 20 per cent and the quantity supplied increased by 10 per cent, then the supply of beef is

Accepted Answer

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

Question 12

When the price of going to a movie rises 5 per cent, the quantity of DVDs demanded increases 10 per cent. The cross elasticity of demand equals

Accepted Answer

A)  -2.0. 
B)  -0.50. 
C)  10.0. 
D)  2.0. 
E)  0.50. 
A)  -2.0. 
B)  -0.50. 
C)  10.0. 
D)  2.0. 
E)  0.50.

Question 13

The cross elasticity of demand for butter and margarine is likely to be

Accepted Answer

A)  negative because they are complements. 
B)  positive because they are normal goods. 
C)  negative because they are substitutes. 
D)  positive because they are substitutes. 
E)  positive because they are complements. 
A)  negative because they are complements. 
B)  positive because they are normal goods. 
C)  negative because they are substitutes. 
D)  positive because they are substitutes. 
E)  positive because they are complements.

Question 14

When the percentage change in the quantity demanded equals the percentage change in price, then demand is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  undefined. 
E)  irrelevant. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  undefined. 
E)  irrelevant.

Question 15

During the winter of 2017-2018, the price of heating oil in Canberra increased enormously but the quantity demanded decreased only a little. This response indicates that the demand for heating oil was

Accepted Answer

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

Question 16

Supply is unit elastic when the

Accepted Answer

A)  percentage change in the quantity supplied equals the percentage change in price. 
B)  supply curve is upward sloping. 
C)  supply curve is horizontal. 
D)  supply curve is vertical. 
E)  price elasticity of supply is positive. 
A)  percentage change in the quantity supplied equals the percentage change in price. 
B)  supply curve is upward sloping. 
C)  supply curve is horizontal. 
D)  supply curve is vertical. 
E)  price elasticity of supply is positive.

Question 17

If the price elasticity of demand for a product is 2.5, then a price increase of 1.5 per cent decreases the quantity demanded by

Accepted Answer

A)  5.00 per cent. 
B)  3.75 per cent. 
C)  3.50 per cent. 
D)  1.00 per cent. 
E)  1.55 per cent. 
A)  5.00 per cent. 
B)  3.75 per cent. 
C)  3.50 per cent. 
D)  1.00 per cent. 
E)  1.55 per cent.

Question 18

-Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the price elasticity of demand? (Use the midpoint method.)

Accepted Answer

A)  0.33 
B)  1.00 
C)  1.33 
D)  3.00 
E)  0.25 
A)  0.33 
B)  1.00 
C)  1.33 
D)  3.00 
E)  0.25

Question 19

When the percentage change in the quantity supplied is less than the percentage change in price, the supply is

Accepted Answer

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

Question 20

A 10 per cent increase in price leads to a 20 per cent decrease in the quantity demanded. The price elasticity of demand is equal to

Accepted Answer

A)  10.0. 
B)  20.0. 
C)  2.0. 
D)  1.0. 
E)  0.5. 
A)  10.0. 
B)  20.0. 
C)  2.0. 
D)  1.0. 
E)  0.5.

If a 5 per cent increase in income brings about a 10 per cent decrease in the demand for a good, then the

The income elasticity of demand for skiing trips to Falls Creek is greater than one. Thus a trip to Falls Creek for skiing is ________ good.

You own a small store. Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue. The cashier thinks the price elasticity of demand is and the customer believes the price elasticity of demand is .

Goods that can be produced at a constant or very gently rising opportunity cost have

The income elasticity of demand is if the good is good.

If the cross elasticity of demand for DVD players and DVDs equals -2, then the products are

-The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in price?

Perfectly inelastic demand means that consumers

Suppose the current price of barley is $70 per tonne and at that price 100,000 tonnes are grown by a Victorian farmer. If the price of barley rises to $80 and quantity supplied increases to 130,000 tonnes then, using the midpoint method, the price elasticity of supply for barley equals

If the price elasticity of demand for petrol equals 0.3, then an increase in the price of a litre of petrol from $3.70 to $3.90

If the price of beef increased by 20 per cent and the quantity supplied increased by 10 per cent, then the supply of beef is

When the price of going to a movie rises 5 per cent, the quantity of DVDs demanded increases 10 per cent. The cross elasticity of demand equals

The cross elasticity of demand for butter and margarine is likely to be

When the percentage change in the quantity demanded equals the percentage change in price, then demand is

During the winter of 2017-2018, the price of heating oil in Canberra increased enormously but the quantity demanded decreased only a little. This response indicates that the demand for heating oil was

Supply is unit elastic when the

If the price elasticity of demand for a product is 2.5, then a price increase of 1.5 per cent decreases the quantity demanded by

-Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the price elasticity of demand? (Use the midpoint method.)

When the percentage change in the quantity supplied is less than the percentage change in price, the supply is

A 10 per cent increase in price leads to a 20 per cent decrease in the quantity demanded. The price elasticity of demand is equal to

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 5: Elasticities of Demand and Supply

If a 5 per cent increase in income brings about a 10 per cent decrease in the demand for a good, then the

The income elasticity of demand for skiing trips to Falls Creek is greater than one. Thus a trip to Falls Creek for skiing is ________ good.

Goods that can be produced at a constant or very gently rising opportunity cost have

The income elasticity of demand is ________ if the good is ________ good.

If the cross elasticity of demand for DVD players and DVDs equals -2, then the products are

-The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in price?

Perfectly inelastic demand means that consumers

Suppose the current price of barley is $70 per tonne and at that price 100,000 tonnes are grown by a Victorian farmer. If the price of barley rises to $80 and quantity supplied increases to 130,000 tonnes then, using the midpoint method, the price elasticity of supply for barley equals

If the price elasticity of demand for petrol equals 0.3, then an increase in the price of a litre of petrol from $3.70 to $3.90

If the price of beef increased by 20 per cent and the quantity supplied increased by 10 per cent, then the supply of beef is

When the price of going to a movie rises 5 per cent, the quantity of DVDs demanded increases 10 per cent. The cross elasticity of demand equals

The cross elasticity of demand for butter and margarine is likely to be

When the percentage change in the quantity demanded equals the percentage change in price, then demand is

During the winter of 2017-2018, the price of heating oil in Canberra increased enormously but the quantity demanded decreased only a little. This response indicates that the demand for heating oil was

Supply is unit elastic when the

If the price elasticity of demand for a product is 2.5, then a price increase of 1.5 per cent decreases the quantity demanded by

-Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the price elasticity of demand? (Use the midpoint method.)

When the percentage change in the quantity supplied is less than the percentage change in price, the supply is

A 10 per cent increase in price leads to a 20 per cent decrease in the quantity demanded. The price elasticity of demand is equal to

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

The income elasticity of demand is if the good is good.