Question 1

When the percentage change in the quantity supplied is twice the percentage change in price, then supply is

Accepted Answer

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

Question 2

Suppose the demand for oranges sold from one roadside stand in South Australia is perfectly elastic. As a result, a 7 per cent increase in the price charged by the owner of this stand leads to

Accepted Answer

A)  a virtually infinite increase in the quantity demanded at this stand. 
B)  no change in the quantity demanded at this stand. 
C)  zero peaches sold by this stand. 
D)  a 7 per cent decrease in the quantity demanded at this stand. 
E)  a 7 per cent decrease in demand at this stand. 
A)  a virtually infinite increase in the quantity demanded at this stand. 
B)  no change in the quantity demanded at this stand. 
C)  zero peaches sold by this stand. 
D)  a 7 per cent decrease in the quantity demanded at this stand. 
E)  a 7 per cent decrease in demand at this stand.

Question 3

If a product is an inferior good, then its income elasticity of demand is

Accepted Answer

A)  indeterminate. 
B)  negative. 
C)  zero. 
D)  positive. 
E)  undefined. 
A)  indeterminate. 
B)  negative. 
C)  zero. 
D)  positive. 
E)  undefined.

Question 4

-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 price elasticity of demand?

Accepted Answer

A)  0.9 
B)  0.6 
C)  0.5 
D)  2.1 
E)  8.6 
A)  0.9 
B)  0.6 
C)  0.5 
D)  2.1 
E)  8.6

Question 5

If the cross elasticity of demand between Coke and Pepsi is 2.02, then Coke and Pepsi are

Accepted Answer

A)  inferior goods. 
B)  complements. 
C)  normal goods. 
D)  substitutes. 
E)  Both answers B and C are correct. 
A)  inferior goods. 
B)  complements. 
C)  normal goods. 
D)  substitutes. 
E)  Both answers B and C are correct.

Question 6

-Using the table above, the elasticity of demand is equal to 1 at a price of

Accepted Answer

A)  $6. 
B)  $3. 
C)  $5. 
D)  $8. 
E)  $1. 
A)  $6. 
B)  $3. 
C)  $5. 
D)  $8. 
E)  $1.

Question 7

The price of one-bedroom apartments in Mildura increased from $55,000 to $65,000 and the quantity of apartments for sale increased from 25 to 30. Using the midpoint method, the price elasticity of supply for apartments in Mildura is equal to

Accepted Answer

A)  0.916. 
B)  0.08. 
C)  2.18. 
D)  1.09. 
E)  0.75. 
A)  0.916. 
B)  0.08. 
C)  2.18. 
D)  1.09. 
E)  0.75.

Question 8

If the price of a good increases by 10 per cent and the quantity supplied increases by 5 per cent, then the elasticity of supply is

Accepted Answer

A)  negative and supply is inelastic. 
B)  less than one and supply is inelastic. 
C)  greater than one and supply is elastic. 
D)  less than one and supply is elastic. 
E)  greater than one and supply is inelastic. 
A)  negative and supply is inelastic. 
B)  less than one and supply is inelastic. 
C)  greater than one and supply is elastic. 
D)  less than one and supply is elastic. 
E)  greater than one and supply is inelastic.

Question 9

If a 1 per cent increase in the price of X increases the quantity demanded of Y by 2 per cent, then X and Y are

Accepted Answer

A)  normal goods and the income elasticity of demand of each equals 2. 
B)  substitutes and the cross elasticity of demand equals 2. 
C)  substitutes and the cross elasticity of demand equals 1/2. 
D)  complements and the cross elasticity of demand equals 2. 
E)  complements and the income elasticity of demand equals 2. 
A)  normal goods and the income elasticity of demand of each equals 2. 
B)  substitutes and the cross elasticity of demand equals 2. 
C)  substitutes and the cross elasticity of demand equals 1/2. 
D)  complements and the cross elasticity of demand equals 2. 
E)  complements and the income elasticity of demand equals 2.

Question 10

If the demand for a good is elastic, then

Accepted Answer

A)  the quantity demanded divided by the price exceeds 1.00. 
B)  a change in the quantity demanded is smaller than the change in price. 
C)  a change in price leads to a smaller percentage change in the quantity demanded. 
D)  people substantially decrease the quantity of the good they buy if its price increases by a small percentage. 
E)  people do not change the quantity they demand when the price of the good changes. 
A)  the quantity demanded divided by the price exceeds 1.00. 
B)  a change in the quantity demanded is smaller than the change in price. 
C)  a change in price leads to a smaller percentage change in the quantity demanded. 
D)  people substantially decrease the quantity of the good they buy if its price increases by a small percentage. 
E)  people do not change the quantity they demand when the price of the good changes.

Question 11

If a good is a necessity, it has ________ substitutes and its demand is ________.

Accepted Answer

A)  poor; elastic 
B)  many; elastic 
C)  many; inelastic 
D)  poor; inelastic 
E)  many; precisely unit elastic 
A)  poor; elastic 
B)  many; elastic 
C)  many; inelastic 
D)  poor; inelastic 
E)  many; precisely unit elastic

Question 12

If a 2 per cent rise in price leads to a 4 per cent decrease in quantity demanded, then demand is

Accepted Answer

A)  elastic and total revenue increases. 
B)  elastic, but we cannot tell what happens to total revenue without more information. 
C)  elastic and total revenue decreases. 
D)  inelastic and total revenue decreases. 
E)  Total revenue decreases but we cannot tell if the demand is elastic or inelastic without more information. 
A)  elastic and total revenue increases. 
B)  elastic, but we cannot tell what happens to total revenue without more information. 
C)  elastic and total revenue decreases. 
D)  inelastic and total revenue decreases. 
E)  Total revenue decreases but we cannot tell if the demand is elastic or inelastic without more information.

Question 13

Of the following, which good has the most elastic demand?

Accepted Answer

A)  Breakfast food 
B)  Breakfast cereal 
C)  Sultana Bran purchased at a Woolworths supermarket 
D)  Food 
E)  Sultana Bran 
A)  Breakfast food 
B)  Breakfast cereal 
C)  Sultana Bran purchased at a Woolworths supermarket 
D)  Food 
E)  Sultana Bran

Question 14

If the price doubles and the quantity supplied also doubles, the price elasticity of supply for the good is

Accepted Answer

A)  2. 
B)  1. 
C)  -2. 
D)  -1. 
E)  100 per cent. 
A)  2. 
B)  1. 
C)  -2. 
D)  -1. 
E)  100 per cent.

Question 15

If the price of one good increases and the quantity demanded of a different good decreases, then these two goods are

Accepted Answer

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

Question 16

If a product is narrowly defined, it is likely to

Accepted Answer

A)  have few substitutes, and therefore its demand is less elastic. 
B)  be unique and have many substitutes. 
C)  be unique, and therefore its demand is inelastic. 
D)  have a larger proportion of income spent on it. 
E)  have many substitutes and therefore its demand is elastic. 
A)  have few substitutes, and therefore its demand is less elastic. 
B)  be unique and have many substitutes. 
C)  be unique, and therefore its demand is inelastic. 
D)  have a larger proportion of income spent on it. 
E)  have many substitutes and therefore its demand is elastic.

Question 17

Krispy Kreme raises the price of its donuts. The price elasticity of demand for Krispy Kreme donuts equals 5.0. What happens to Krispy Kremes' total revenue?

Accepted Answer

A)  It becomes negative. 
B)  It increases. 
C)  Nothing. 
D)  It decreases. 
E)  It might change, but more information is needed to determine if it increases, decreases or does not change. 
A)  It becomes negative. 
B)  It increases. 
C)  Nothing. 
D)  It decreases. 
E)  It might change, but more information is needed to determine if it increases, decreases or does not change.

Question 18

At the midpoint of a linear, downward-sloping demand curve, the price elasticity of demand is

Accepted Answer

A)  less than one but greater than zero. 
B)  zero. 
C)  infinite. 
D)  greater than one. 
E)  equal to one. 
A)  less than one but greater than zero. 
B)  zero. 
C)  infinite. 
D)  greater than one. 
E)  equal to one.

Question 19

KFC raises the price of its chicken nuggets. The price elasticity of demand for KFC chicken nuggets is 0.8. What happens to KFC's total revenue?

Accepted Answer

A)  It decreases. 
B)  Nothing. 
C)  It increases. 
D)  It becomes negative. 
E)  It might change, but more information is needed to determine if it increases, decreases or does not change. 
A)  It decreases. 
B)  Nothing. 
C)  It increases. 
D)  It becomes negative. 
E)  It might change, but more information is needed to determine if it increases, decreases or does not change.

Question 20

A firm raises the price it charges. The firm's total revenue does not change. What can we conclude about the price elasticity of demand?

Accepted Answer

A)  Demand is elastic. 
B)  Demand is perfectly elastic. 
C)  Demand is unit elastic. 
D)  Demand is inelastic. 
E)  Not enough information is given to conclude anything about price elasticity of demand. 
A)  Demand is elastic. 
B)  Demand is perfectly elastic. 
C)  Demand is unit elastic. 
D)  Demand is inelastic. 
E)  Not enough information is given to conclude anything about price elasticity of demand.

When the percentage change in the quantity supplied is twice the percentage change in price, then supply is

Suppose the demand for oranges sold from one roadside stand in South Australia is perfectly elastic. As a result, a 7 per cent increase in the price charged by the owner of this stand leads to

If a product is an inferior good, then its income elasticity of demand is

-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 price elasticity of demand?

If the cross elasticity of demand between Coke and Pepsi is 2.02, then Coke and Pepsi are

-Using the table above, the elasticity of demand is equal to 1 at a price of

The price of one-bedroom apartments in Mildura increased from $55,000 to $65,000 and the quantity of apartments for sale increased from 25 to 30. Using the midpoint method, the price elasticity of supply for apartments in Mildura is equal to

If the price of a good increases by 10 per cent and the quantity supplied increases by 5 per cent, then the elasticity of supply is

If a 1 per cent increase in the price of X increases the quantity demanded of Y by 2 per cent, then X and Y are

If the demand for a good is elastic, then

If a good is a necessity, it has substitutes and its demand is .

If a 2 per cent rise in price leads to a 4 per cent decrease in quantity demanded, then demand is

Of the following, which good has the most elastic demand?

If the price doubles and the quantity supplied also doubles, the price elasticity of supply for the good is

If the price of one good increases and the quantity demanded of a different good decreases, then these two goods are

If a product is narrowly defined, it is likely to

Krispy Kreme raises the price of its donuts. The price elasticity of demand for Krispy Kreme donuts equals 5.0. What happens to Krispy Kremes' total revenue?

At the midpoint of a linear, downward-sloping demand curve, the price elasticity of demand is

KFC raises the price of its chicken nuggets. The price elasticity of demand for KFC chicken nuggets is 0.8. What happens to KFC's total revenue?

A firm raises the price it charges. The firm's total revenue does not change. What can we conclude about the price elasticity of demand?

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

When the percentage change in the quantity supplied is twice the percentage change in price, then supply is

Suppose the demand for oranges sold from one roadside stand in South Australia is perfectly elastic. As a result, a 7 per cent increase in the price charged by the owner of this stand leads to

If a product is an inferior good, then its income elasticity of demand is

-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 price elasticity of demand?

If the cross elasticity of demand between Coke and Pepsi is 2.02, then Coke and Pepsi are

-Using the table above, the elasticity of demand is equal to 1 at a price of

The price of one-bedroom apartments in Mildura increased from $55,000 to $65,000 and the quantity of apartments for sale increased from 25 to 30. Using the midpoint method, the price elasticity of supply for apartments in Mildura is equal to

If the price of a good increases by 10 per cent and the quantity supplied increases by 5 per cent, then the elasticity of supply is

If a 1 per cent increase in the price of X increases the quantity demanded of Y by 2 per cent, then X and Y are

If the demand for a good is elastic, then

If a good is a necessity, it has ________ substitutes and its demand is ________.

If a 2 per cent rise in price leads to a 4 per cent decrease in quantity demanded, then demand is

Of the following, which good has the most elastic demand?

If the price doubles and the quantity supplied also doubles, the price elasticity of supply for the good is

If the price of one good increases and the quantity demanded of a different good decreases, then these two goods are

If a product is narrowly defined, it is likely to

Krispy Kreme raises the price of its donuts. The price elasticity of demand for Krispy Kreme donuts equals 5.0. What happens to Krispy Kremes' total revenue?

At the midpoint of a linear, downward-sloping demand curve, the price elasticity of demand is

KFC raises the price of its chicken nuggets. The price elasticity of demand for KFC chicken nuggets is 0.8. What happens to KFC's total revenue?

A firm raises the price it charges. The firm's total revenue does not change. What can we conclude about the price elasticity of demand?

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 good is a necessity, it has substitutes and its demand is .