Question 1

To determine the price elasticity of demand, we

Accepted Answer

A)  compare the change in the quantity to the change in price. 
B)  compare the percentage change in the quantity demanded to the percentage change in price. 
C)  need information on consumers' incomes. 
D)  divide the quantity by the price. 
E)  need to know how much is available. 
A)  compare the change in the quantity to the change in price. 
B)  compare the percentage change in the quantity demanded to the percentage change in price. 
C)  need information on consumers' incomes. 
D)  divide the quantity by the price. 
E)  need to know how much is available.

Question 2

For which of the following would the supply likely be most inelastic?

Accepted Answer

A)  Canned soup 
B)  A t-shirt 
C)  An aircraft carrier 
D)  A toy aeroplane 
E)  Bottled water 
A)  Canned soup 
B)  A t-shirt 
C)  An aircraft carrier 
D)  A toy aeroplane 
E)  Bottled water

Question 3

-In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $7 to $6 is equal to

Accepted Answer

A)  0.40. 
B)  2.50. 
C)  0.62. 
D)  1.00. 
E)  1.63. 
A)  0.40. 
B)  2.50. 
C)  0.62. 
D)  1.00. 
E)  1.63.

Question 4

Which of the following explains why supply is more elastic as more time passes?

Accepted Answer

A)  Sellers try to take advantage of a high price in the short term. 
B)  It is difficult or impossible to increase the quantity produced in a short period of time. 
C)  The supply curve becomes generally steeper as more time passes. 
D)  Consumers have more time to search for substitutes. 
E)  There is no explanation for this phenomenon. 
A)  Sellers try to take advantage of a high price in the short term. 
B)  It is difficult or impossible to increase the quantity produced in a short period of time. 
C)  The supply curve becomes generally steeper as more time passes. 
D)  Consumers have more time to search for substitutes. 
E)  There is no explanation for this phenomenon.

Question 5

The price elasticity of supply measures

Accepted Answer

A)  the percentage change in supply from a percentage change in demand. 
B)  how the equilibrium price changes in response to a change in the equilibrium quantity supplied. 
C)  the slope of the supply curve. 
D)  the extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same. 
E)  Both answers B and C are correct. 
A)  the percentage change in supply from a percentage change in demand. 
B)  how the equilibrium price changes in response to a change in the equilibrium quantity supplied. 
C)  the slope of the supply curve. 
D)  the extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same. 
E)  Both answers B and C are correct.

Question 6

-Using the table above, what is the elasticity of demand between the prices of $9 and $7?

Accepted Answer

A)  4 
B)  6 
C)  1 
D)  2 
E)  1/4 
A)  4 
B)  6 
C)  1 
D)  2 
E)  1/4

Question 7

If the supply of a good decreases and it causes total revenue to increase, this shows that the good has a(n)

Accepted Answer

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

Question 8

If a 20 per cent increase in the price of a good does not change the quantity supplied, the

Accepted Answer

A)  supply is unit elastic. 
B)  supply is perfectly inelastic. 
C)  supply is perfectly elastic. 
D)  supply is elastic. 
E)  None of the above answers is correct. 
A)  supply is unit elastic. 
B)  supply is perfectly inelastic. 
C)  supply is perfectly elastic. 
D)  supply is elastic. 
E)  None of the above answers is correct.

Question 9

If your income was to rise from $20,000 to $30,000 and the quantity of inter-city bus trips you take per year decreases from 10 to 8. Then, for you,

Accepted Answer

A)  inter-city bus trips are a normal good. 
B)  the income elasticity of demand for inter-city bus trips is -0.56. 
C)  the income elasticity of demand for inter-city bus trips is -1.8. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  inter-city bus trips are a normal good. 
B)  the income elasticity of demand for inter-city bus trips is -0.56. 
C)  the income elasticity of demand for inter-city bus trips is -1.8. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Question 10

The cross elasticity between computers and software is

Accepted Answer

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

Question 11

If a bakery raises the price of its bread by 11 per cent and the quantity demanded decreases by 11 per cent, then the demand for its bread is ________ and the bakery's total revenue ________.

Accepted Answer

A)  unit elastic; increases 
B)  elastic; does not change 
C)  unit elastic; decreases 
D)  unit elastic; does not change 
E)  inelastic; does not change 
A)  unit elastic; increases 
B)  elastic; does not change 
C)  unit elastic; decreases 
D)  unit elastic; does not change 
E)  inelastic; does not change

Question 12

If the income elasticity of demand for used cars is less than zero, then used cars are

Accepted Answer

A)  a normal good. 
B)  a perfectly inelastic good. 
C)  an inelastic good. 
D)  an inferior good. 
E)  a substitute good. 
A)  a normal good. 
B)  a perfectly inelastic good. 
C)  an inelastic good. 
D)  an inferior good. 
E)  a substitute good.

Question 13

If a 10 per cent price increase generates a 10 per cent decrease in quantity demanded, then demand is

Accepted Answer

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

Question 14

Demand for a product tends to be more elastic the longer the time period considered because

Accepted Answer

A)  sellers have more time to expand production. 
B)  buyers get used to the new price. 
C)  buyers have more time to search for substitutes. 
D)  the inverse relationship between the price and the quantity demanded weakens over time. 
E)  price increases over time make the price larger relative to buyers' incomes. 
A)  sellers have more time to expand production. 
B)  buyers get used to the new price. 
C)  buyers have more time to search for substitutes. 
D)  the inverse relationship between the price and the quantity demanded weakens over time. 
E)  price increases over time make the price larger relative to buyers' incomes.

Question 15

If a 30 per cent price increase generates a 20 per cent decrease in quantity demanded, then demand is

Accepted Answer

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

Question 16

The cross elasticity of demand for blank DVDs and DVD burners is likely to be

Accepted Answer

A)  negative because they are complements. 
B)  positive because they are substitutes. 
C)  negative because they are substitutes. 
D)  positive because they are complements. 
E)  negative because, with the advent of digital cameras, film and film cameras are inferior goods. 
A)  negative because they are complements. 
B)  positive because they are substitutes. 
C)  negative because they are substitutes. 
D)  positive because they are complements. 
E)  negative because, with the advent of digital cameras, film and film cameras are inferior goods.

Question 17

-In the figure above, when the price falls from $8 to $7, total revenue

Accepted Answer

A)  increases from $120 to $210 so demand is inelastic. 
B)  decreases from $210 to $120 so demand is inelastic. 
C)  increases from $120 to $210 so demand is elastic. 
D)  decreases from $210 to $120 so demand is elastic. 
E)  increases from $120 to $210, but more information is needed to determine whether demand is elastic, inelastic or unit elastic. 
A)  increases from $120 to $210 so demand is inelastic. 
B)  decreases from $210 to $120 so demand is inelastic. 
C)  increases from $120 to $210 so demand is elastic. 
D)  decreases from $210 to $120 so demand is elastic. 
E)  increases from $120 to $210, but more information is needed to determine whether demand is elastic, inelastic or unit elastic.

Question 18

A product that has a negative income elasticity of demand is ________ good.

Accepted Answer

A)  a normal 
B)  a negative 
C)  a complementary 
D)  an inferior 
E)  a substitute 
A)  a normal 
B)  a negative 
C)  a complementary 
D)  an inferior 
E)  a substitute

Question 19

The demand for a necessity generally is

Accepted Answer

A)  unit elastic. 
B)  infinitely elastic. 
C)  very elastic. 
D)  inelastic. 
E)  unaffected by income. 
A)  unit elastic. 
B)  infinitely elastic. 
C)  very elastic. 
D)  inelastic. 
E)  unaffected by income.

Question 20

If the quantity supplied and the price change by the same percentage, then supply is

Accepted Answer

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

To determine the price elasticity of demand, we

For which of the following would the supply likely be most inelastic?

-In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $7 to $6 is equal to

Which of the following explains why supply is more elastic as more time passes?

The price elasticity of supply measures

-Using the table above, what is the elasticity of demand between the prices of $9 and $7?

If the supply of a good decreases and it causes total revenue to increase, this shows that the good has a(n)

If a 20 per cent increase in the price of a good does not change the quantity supplied, the

If your income was to rise from $20,000 to $30,000 and the quantity of inter-city bus trips you take per year decreases from 10 to 8. Then, for you,

The cross elasticity between computers and software is

If a bakery raises the price of its bread by 11 per cent and the quantity demanded decreases by 11 per cent, then the demand for its bread is and the bakery's total revenue .

If the income elasticity of demand for used cars is less than zero, then used cars are

If a 10 per cent price increase generates a 10 per cent decrease in quantity demanded, then demand is

Demand for a product tends to be more elastic the longer the time period considered because

If a 30 per cent price increase generates a 20 per cent decrease in quantity demanded, then demand is

The cross elasticity of demand for blank DVDs and DVD burners is likely to be

-In the figure above, when the price falls from $8 to $7, total revenue

A product that has a negative income elasticity of demand is ________ good.

The demand for a necessity generally is

If the quantity supplied and the price change by the same percentage, then supply is

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

To determine the price elasticity of demand, we

For which of the following would the supply likely be most inelastic?

-In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $7 to $6 is equal to

Which of the following explains why supply is more elastic as more time passes?

The price elasticity of supply measures

-Using the table above, what is the elasticity of demand between the prices of $9 and $7?

If the supply of a good decreases and it causes total revenue to increase, this shows that the good has a(n)

If a 20 per cent increase in the price of a good does not change the quantity supplied, the

If your income was to rise from $20,000 to $30,000 and the quantity of inter-city bus trips you take per year decreases from 10 to 8. Then, for you,

The cross elasticity between computers and software is

If a bakery raises the price of its bread by 11 per cent and the quantity demanded decreases by 11 per cent, then the demand for its bread is ________ and the bakery's total revenue ________.

If the income elasticity of demand for used cars is less than zero, then used cars are

If a 10 per cent price increase generates a 10 per cent decrease in quantity demanded, then demand is

Demand for a product tends to be more elastic the longer the time period considered because

If a 30 per cent price increase generates a 20 per cent decrease in quantity demanded, then demand is

The cross elasticity of demand for blank DVDs and DVD burners is likely to be

-In the figure above, when the price falls from $8 to $7, total revenue

A product that has a negative income elasticity of demand is ________ good.

The demand for a necessity generally is

If the quantity supplied and the price change by the same percentage, then supply is

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

If a bakery raises the price of its bread by 11 per cent and the quantity demanded decreases by 11 per cent, then the demand for its bread is and the bakery's total revenue .