Question 1

The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is

Accepted Answer

A)  limited by the demand. 
B)  perfectly elastic. 
C)  elastic. 
D)  unit elastic. 
E)  inelastic. 
A)  limited by the demand. 
B)  perfectly elastic. 
C)  elastic. 
D)  unit elastic. 
E)  inelastic.

Question 2

If your income was to increase from $20,000 to $30,000 and the number of home -delivered pizzas you bought per year increased from 22 to 40, then your income elasticity of demand for home-delivered pizza equals

Accepted Answer

A)  1.45. 
B)  0.58. 
C)  2.86. 
D)  0.69. 
E)  0.40. 
A)  1.45. 
B)  0.58. 
C)  2.86. 
D)  0.69. 
E)  0.40.

Question 3

If a firm supplies 200 units at a price of $50 and 100 units at a price of $40, using the midpoint method, what is the price elasticity of supply?

Accepted Answer

A)  5.00 
B)  8.50 
C)  0.33 
D)  1.00 
E)  3.00 
A)  5.00 
B)  8.50 
C)  0.33 
D)  1.00 
E)  3.00

Question 4

Alan purchases 10 per cent fewer bags of corn chips when his income decreases by 5 per cent. Based on only this information, we know that for Alan

Accepted Answer

A)  corn chips are a complement to salsa. 
B)  corn chips are an inferior good. 
C)  corn chips are a substitute for pretzels. 
D)  corn chips are a normal good. 
E)  the price of chips fell. 
A)  corn chips are a complement to salsa. 
B)  corn chips are an inferior good. 
C)  corn chips are a substitute for pretzels. 
D)  corn chips are a normal good. 
E)  the price of chips fell.

Question 5

The price of the good multiplied by the quantity sold is its

Accepted Answer

A)  total spending. 
B)  total quantity. 
C)  total cost. 
D)  total income. 
E)  total revenue. 
A)  total spending. 
B)  total quantity. 
C)  total cost. 
D)  total income. 
E)  total revenue.

Question 6

If the price elasticity of supply for a good is 0.75, then

Accepted Answer

A)  the supply is elastic. 
B)  the supply is inelastic so the demand must also be inelastic. 
C)  an increase in the price boosts the quantity supplied by a larger percentage. 
D)  the percentage change in the quantity supplied is less than the percentage change in price. 
E)  None of the above answers is correct. 
A)  the supply is elastic. 
B)  the supply is inelastic so the demand must also be inelastic. 
C)  an increase in the price boosts the quantity supplied by a larger percentage. 
D)  the percentage change in the quantity supplied is less than the percentage change in price. 
E)  None of the above answers is correct.

Question 7

We calculate the price elasticity of demand as the

Accepted Answer

A)  ratio of the percentage change in price to the percentage change in quantity. 
B)  change in quantity divided by the change in price. 
C)  ratio of the percentage change in the quantity demanded to the percentage change in price. 
D)  equilibrium quantity divided by the equilibrium price. 
E)  percentage change in the quantity demanded divided by the percentage change in income. 
A)  ratio of the percentage change in price to the percentage change in quantity. 
B)  change in quantity divided by the change in price. 
C)  ratio of the percentage change in the quantity demanded to the percentage change in price. 
D)  equilibrium quantity divided by the equilibrium price. 
E)  percentage change in the quantity demanded divided by the percentage change in income.

Question 8

A product's price elasticity of demand is likely to be greater

Accepted Answer

A)  the less time consumers have to adjust to price changes. 
B)  if consumers spend a small proportion of income on the product. 
C)  if it only has a few substitutes. 
D)  if the product is a luxury good rather than a necessity. 
E)  Both answers C and D are correct. 
A)  the less time consumers have to adjust to price changes. 
B)  if consumers spend a small proportion of income on the product. 
C)  if it only has a few substitutes. 
D)  if the product is a luxury good rather than a necessity. 
E)  Both answers C and D are correct.

Question 9

Many manufactured goods have an ________ supply if production plans have only a short period to change and, as time passes and all production adjustments are made, the supply of the good ________ from the initial response.

Accepted Answer

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

Question 10

Suppose the price of a box of breakfast cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?

Accepted Answer

A)  67 per cent 
B)  40 per cent 
C)  50 per cent 
D)  33 per cent 
E)  None of the above answers is correct. 
A)  67 per cent 
B)  40 per cent 
C)  50 per cent 
D)  33 per cent 
E)  None of the above answers is correct.

Question 11

-In the figure above, what is the total revenue at point A?

Accepted Answer

A)  $150 
B)  $170 
C)  $20 
D)  $3,000 
E)  150 quantity units 
A)  $150 
B)  $170 
C)  $20 
D)  $3,000 
E)  150 quantity units

Question 12

If wheat can be produced at a constant opportunity cost, then the supply of wheat is

Accepted Answer

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

Question 13

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month. Using the midpoint method, the price elasticity of demand equals

Accepted Answer

A)  1. 
B)  1/2. 
C)  1/3. 
D)  2. 
E)  3. 
A)  1. 
B)  1/2. 
C)  1/3. 
D)  2. 
E)  3.

Question 14

When minced beef is $3 per kilo, Ms. Rush buys 6 kilos. When minced beef is $2 per kilo, Ms. Rush buys 10 kilo. Describe Ms. Rush's demand between these two prices.

Accepted Answer

A)  Unit elastic 
B)  Elastic 
C)  Inelastic 
D)  Perfectly elastic 
E)  Perfectly inelastic 
A)  Unit elastic 
B)  Elastic 
C)  Inelastic 
D)  Perfectly elastic 
E)  Perfectly inelastic

Question 15

The income elasticity of demand is a measure of

Accepted Answer

A)  the extent to which the supply of a good changes when the demand changes as a result of a change in income. 
B)  the extent to which the demand for a good changes when income changes. 
C)  how responsive suppliers are to changes in the price of a product. 
D)  how responsive consumers are to changes in the price of a product. 
E)  how demand for a product changes when the price of a substitute or complement product changes. 
A)  the extent to which the supply of a good changes when the demand changes as a result of a change in income. 
B)  the extent to which the demand for a good changes when income changes. 
C)  how responsive suppliers are to changes in the price of a product. 
D)  how responsive consumers are to changes in the price of a product. 
E)  how demand for a product changes when the price of a substitute or complement product changes.

Question 16

The price elasticity of demand for an agricultural product is 0.4. This value means that, when the quantity decreases 1 per cent, the price

Accepted Answer

A)  rises 4 per cent. 
B)  falls 2.5 per cent. 
C)  rises 2.5 per cent. 
D)  rises 0.25 per cent. 
E)  falls 4 per cent. 
A)  rises 4 per cent. 
B)  falls 2.5 per cent. 
C)  rises 2.5 per cent. 
D)  rises 0.25 per cent. 
E)  falls 4 per cent.

Question 17

Suppose the price of a ticket to a Rolling Stones concert is $41 and, at that price, the quantity of tickets demanded is 17,000 per concert. Using the midpoint method of calculating percentage changes, if the Rolling Stones raises the price to $48 and the quantity demanded decreases to 16,000, the price elasticity of demand for their concert tickets is

Accepted Answer

A)  6.06. 
B)  0.93. 
C)  1.00. 
D)  0.39. 
E)  15.73. 
A)  6.06. 
B)  0.93. 
C)  1.00. 
D)  0.39. 
E)  15.73.

Question 18

If a lower price for good X increases the demand for good Y, the cross elasticity value for the two goods is

Accepted Answer

A)  positive and greater than one. 
B)  positive and less than one. 
C)  negative. 
D)  equal to zero. 
E)  possibly negative, positive or zero, but there is not enough information to decide. 
A)  positive and greater than one. 
B)  positive and less than one. 
C)  negative. 
D)  equal to zero. 
E)  possibly negative, positive or zero, but there is not enough information to decide.

Question 19

Which of the following does NOT influence the price elasticity of demand?

Accepted Answer

A)  Whether the good is a necessity or a luxury. 
B)  The amount by which the demand curve shifts when the price of another good changes. 
C)  The number of substitutes available to consumers. 
D)  The time period buyers have to respond to a price change. 
E)  The price of the good relative to total income. 
A)  Whether the good is a necessity or a luxury. 
B)  The amount by which the demand curve shifts when the price of another good changes. 
C)  The number of substitutes available to consumers. 
D)  The time period buyers have to respond to a price change. 
E)  The price of the good relative to total income.

Question 20

If the price of DVDs falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 to 100,000, using the midpoint formula the elasticity of supply equals

Accepted Answer

A)  0.33. 
B)  2.94. 
C)  -3.08. 
D)  3.08. 
E)  0.23. 
A)  0.33. 
B)  2.94. 
C)  -3.08. 
D)  3.08. 
E)  0.23.

The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is

If your income was to increase from $20,000 to $30,000 and the number of home -delivered pizzas you bought per year increased from 22 to 40, then your income elasticity of demand for home-delivered pizza equals

If a firm supplies 200 units at a price of $50 and 100 units at a price of $40, using the midpoint method, what is the price elasticity of supply?

Alan purchases 10 per cent fewer bags of corn chips when his income decreases by 5 per cent. Based on only this information, we know that for Alan

The price of the good multiplied by the quantity sold is its

If the price elasticity of supply for a good is 0.75, then

We calculate the price elasticity of demand as the

A product's price elasticity of demand is likely to be greater

Many manufactured goods have an supply if production plans have only a short period to change and, as time passes and all production adjustments are made, the supply of the good from the initial response.

Suppose the price of a box of breakfast cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?

-In the figure above, what is the total revenue at point A?

If wheat can be produced at a constant opportunity cost, then the supply of wheat is

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month. Using the midpoint method, the price elasticity of demand equals

When minced beef is $3 per kilo, Ms. Rush buys 6 kilos. When minced beef is $2 per kilo, Ms. Rush buys 10 kilo. Describe Ms. Rush's demand between these two prices.

The income elasticity of demand is a measure of

The price elasticity of demand for an agricultural product is 0.4. This value means that, when the quantity decreases 1 per cent, the price

If a lower price for good X increases the demand for good Y, the cross elasticity value for the two goods is

Which of the following does NOT influence the price elasticity of demand?

If the price of DVDs falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 to 100,000, using the midpoint formula the elasticity of supply equals

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

The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is

If your income was to increase from $20,000 to $30,000 and the number of home -delivered pizzas you bought per year increased from 22 to 40, then your income elasticity of demand for home-delivered pizza equals

If a firm supplies 200 units at a price of $50 and 100 units at a price of $40, using the midpoint method, what is the price elasticity of supply?

Alan purchases 10 per cent fewer bags of corn chips when his income decreases by 5 per cent. Based on only this information, we know that for Alan

The price of the good multiplied by the quantity sold is its

If the price elasticity of supply for a good is 0.75, then

We calculate the price elasticity of demand as the

A product's price elasticity of demand is likely to be greater

Many manufactured goods have an ________ supply if production plans have only a short period to change and, as time passes and all production adjustments are made, the supply of the good ________ from the initial response.

Suppose the price of a box of breakfast cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?

-In the figure above, what is the total revenue at point A?

If wheat can be produced at a constant opportunity cost, then the supply of wheat is

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month. Using the midpoint method, the price elasticity of demand equals

When minced beef is $3 per kilo, Ms. Rush buys 6 kilos. When minced beef is $2 per kilo, Ms. Rush buys 10 kilo. Describe Ms. Rush's demand between these two prices.

The income elasticity of demand is a measure of

The price elasticity of demand for an agricultural product is 0.4. This value means that, when the quantity decreases 1 per cent, the price

If a lower price for good X increases the demand for good Y, the cross elasticity value for the two goods is

Which of the following does NOT influence the price elasticity of demand?

If the price of DVDs falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 to 100,000, using the midpoint formula the elasticity of supply equals

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

Many manufactured goods have an supply if production plans have only a short period to change and, as time passes and all production adjustments are made, the supply of the good from the initial response.