Question 1

If the income elasticity of demand for a good is 1.25,a 10% increase in income results in

Accepted Answer

A) a 12.5% increase in the quantity demanded. 
B) a 12.5% decrease in the quantity demanded. 
C) a 125% increase in the quantity demanded. 
D) a decrease in quantity demanded. 
E) There is not enough information to answer this question. 
A) a 12.5% increase in the quantity demanded. 
B) a 12.5% decrease in the quantity demanded. 
C) a 125% increase in the quantity demanded. 
D) a decrease in quantity demanded. 
E) There is not enough information to answer this question. A

Question 2

A value of zero for the elasticity of supply of some product implies that

Accepted Answer

A) the supply curve is horizontal. 
B) supply is highly responsive to price. 
C) the supply curve is vertical. 
D) the product will not be supplied at any price. 
E) there is no supply. 
A) the supply curve is horizontal. 
B) supply is highly responsive to price. 
C) the supply curve is vertical. 
D) the product will not be supplied at any price. 
E) there is no supply. C

Question 3

What does the following statement imply about price elasticity of demand? ʺConsumers unfazed by 400 percent increase in price of table salt - grocers see no change in sales!ʺ

Accepted Answer

A) elasticity of demand for salt is equal to one 
B) demand for salt is elastic 
C) salt is too narrowly defined to determine price elasticity of demand 
D) demand for salt is almost perfectly inelastic in the relevant price range 
E) salt is too broadly defined to determine price elasticity of demand 
A) elasticity of demand for salt is equal to one 
B) demand for salt is elastic 
C) salt is too narrowly defined to determine price elasticity of demand 
D) demand for salt is almost perfectly inelastic in the relevant price range 
E) salt is too broadly defined to determine price elasticity of demand D

Question 4

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantity supplied rises from 500 to 1000 units per month.The price elasticity of supply for this product is

Accepted Answer

A) 0.33. 
B) 2.0. 
C) 2.5. 
D) 3.0. 
E) 1.0. 
A) 0.33. 
B) 2.0. 
C) 2.5. 
D) 3.0. 
E) 1.0.

Question 5

Consider the following data for a hypothetical economy.   TABLE 4-5
-Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is________. We can therefore conclude that these two goods are ________.

Accepted Answer

A) 0.5; substitutes 
B) 0.2; substitutes 
C) 5.0; complements 
D) 0.2; complements 
E) 0.33; substitutes 
A) 0.5; substitutes 
B) 0.2; substitutes 
C) 5.0; complements 
D) 0.2; complements 
E) 0.33; substitutes

Question 6

What does the following statement imply about price elasticity of demand? ʺCherry producers in British Columbia experienced a healthy increase in revenues this year,despite a reduced harvest due to poor weather conditions.ʺ

Accepted Answer

A) elastic demand for B.C.cherries 
B) elasticity of demand equal to one for B.C.cherries 
C) inelastic demand for B.C.cherries 
D) elasticity of demand equal to zero for B.C.cherries 
E) infinite elasticity of demand for B.C.cherries 
A) elastic demand for B.C.cherries 
B) elasticity of demand equal to one for B.C.cherries 
C) inelastic demand for B.C.cherries 
D) elasticity of demand equal to zero for B.C.cherries 
E) infinite elasticity of demand for B.C.cherries

Question 7

If the income elasticity of demand for a good is - 3.4,a 25% increase in income results in

Accepted Answer

A) a 4% increase in quantity demanded. 
B) a 0.85% increase in quantity demanded. 
C) an 8.5% decrease in quantity demanded. 
D) an 85% decrease in the quantity demanded. 
E) There is not enough information to answer this question. 
A) a 4% increase in quantity demanded. 
B) a 0.85% increase in quantity demanded. 
C) an 8.5% decrease in quantity demanded. 
D) an 85% decrease in the quantity demanded. 
E) There is not enough information to answer this question.

Question 8

Suppose an increase in world demand for potash (used in the production of fertilizer)increases the price from $285 per tonne to $315 per tonne.Annual Canadian production increases from 15 million tonnes to 17 million tonnes.What is the elasticity of supply of Canadian potash?

Accepted Answer

A) 0.5 
B) 0.8 
C) 1.0 
D) 1.25 
E) 2.5 
A) 0.5 
B) 0.8 
C) 1.0 
D) 1.25 
E) 2.5

Question 9

Which of the following illustrates elastic demand?

Accepted Answer

A) A 5% increase in price causes a 2.5% decrease in quantity demanded. 
B) A 5% increase in price causes a 10% decrease in quantity demanded. 
C) a price elasticity of 0.8 
D) a price elasticity of 1.0 
E) A 10% increase in price causes a 10% reduction in quantity demanded. 
A) A 5% increase in price causes a 2.5% decrease in quantity demanded. 
B) A 5% increase in price causes a 10% decrease in quantity demanded. 
C) a price elasticity of 0.8 
D) a price elasticity of 1.0 
E) A 10% increase in price causes a 10% reduction in quantity demanded.

Question 10

If the total expenditure on perfume increases when the price of perfume falls,the price elasticity of demand is

Accepted Answer

A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given. 
A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given.

Question 11

When a productʹs price has an inverse relationship with total expenditure,then demand has a price elasticity of

Accepted Answer

A) zero. 
B) less than one. 
C) greater than one. 
D) one. 
E) inverse proportions. 
A) zero. 
B) less than one. 
C) greater than one. 
D) one. 
E) inverse proportions.

Question 12

If the price elasticity of demand is 0.5,then a 10% increase in price results in a

Accepted Answer

A) 50% reduction in quantity demanded. 
B) 5% increase in quantity demanded. 
C) 5% decrease in total revenues. 
D) 5% decrease in quantity demanded. 
E) 0.5% decrease in quantity demanded. 
A) 50% reduction in quantity demanded. 
B) 5% increase in quantity demanded. 
C) 5% decrease in total revenues. 
D) 5% decrease in quantity demanded. 
E) 0.5% decrease in quantity demanded.

Question 13

Suppose the price elasticity of demand for good X is 1.5.If household income increases by 25%,ceteris paribus,what is the change in quantity demanded for good X?

Accepted Answer

A) a 37.5% increase in quantity demanded 
B) a 3.75% increase in quantity demanded 
C) a 0.375% increase in quantity demanded 
D) no change in quantity demanded 
E) There is not enough information to answer this question. 
A) a 37.5% increase in quantity demanded 
B) a 3.75% increase in quantity demanded 
C) a 0.375% increase in quantity demanded 
D) no change in quantity demanded 
E) There is not enough information to answer this question.

Question 14

Suppose egg producers succeed in permanently raising the price of their product by 15%,and as a result the quantity demanded falls by 15% in the short run.In the long run we can expect the quantity demanded to fall by

Accepted Answer

A) 0%. 
B) 15%. 
C) between 0 and 15%. 
D) more than 15%. 
E) 100%. 
A) 0%. 
B) 15%. 
C) between 0 and 15%. 
D) more than 15%. 
E) 100%.

Question 15

Cross-price elasticity of demand may be defined as

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 16

If the price elasticity of demand for some good is 2.7,a 10% increase in the price results in

Accepted Answer

A) a 2.7% decrease in the quantity demanded. 
B) a 2.7% increase in the quantity demanded. 
C) a 27% increase in the quantity demanded. 
D) a 27% decrease in the quantity demanded. 
E) There is not enough information to answer this question. 
A) a 2.7% decrease in the quantity demanded. 
B) a 2.7% increase in the quantity demanded. 
C) a 27% increase in the quantity demanded. 
D) a 27% decrease in the quantity demanded. 
E) There is not enough information to answer this question.

Question 17

We can expect that the income elasticity of demand for gourmet catered meals would be ________ the income elasticity of demand for basic groceries.

Accepted Answer

A) equivalent to 
B) not comparable to 
C) less than 
D) higher than 
E) lower than 
A) equivalent to 
B) not comparable to 
C) less than 
D) higher than 
E) lower than

Question 18

The price elasticity of demand for a product tends to be greater the

Accepted Answer

A) lower its price. 
B) more broadly the product is defined. 
C) fewer close substitutes for it there are. 
D) more close substitutes for it there are. 
E) shorter the time span being considered. 
A) lower its price. 
B) more broadly the product is defined. 
C) fewer close substitutes for it there are. 
D) more close substitutes for it there are. 
E) shorter the time span being considered.

Question 19

Income elasticity measures the change in quantity demanded of some product with respect to changes in

Accepted Answer

A) the demand of the product. 
B) the price of another related product. 
C) its price. 
D) the supply of the product. 
E) householdsʹ income. 
A) the demand of the product. 
B) the price of another related product. 
C) its price. 
D) the supply of the product. 
E) householdsʹ income.

Question 20

The table below shows the demand schedule for museum admissions in a small city.   TABLE 4-1
-Refer to Table 4-1.The elasticity of demand for museum admissions is

Accepted Answer

A) greater at higher prices than at lower prices. 
B) elastic at all points on the demand curve. 
C) inelastic at all points on the demand curve. 
D) greater at lower prices than at higher prices. 
E) constant at all points on the demand curve. 
A) greater at higher prices than at lower prices. 
B) elastic at all points on the demand curve. 
C) inelastic at all points on the demand curve. 
D) greater at lower prices than at higher prices. 
E) constant at all points on the demand curve.

Exam 4: Elasticity

If the income elasticity of demand for a good is 1.25,a 10% increase in income results in

A value of zero for the elasticity of supply of some product implies that

What does the following statement imply about price elasticity of demand? ʺConsumers unfazed by 400 percent increase in price of table salt - grocers see no change in sales!ʺ

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantity supplied rises from 500 to 1000 units per month.The price elasticity of supply for this product is

Consider the following data for a hypothetical economy. TABLE 4-5 -Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is________. We can therefore conclude that these two goods are ________.

What does the following statement imply about price elasticity of demand? ʺCherry producers in British Columbia experienced a healthy increase in revenues this year,despite a reduced harvest due to poor weather conditions.ʺ

If the income elasticity of demand for a good is - 3.4,a 25% increase in income results in

Suppose an increase in world demand for potash (used in the production of fertilizer)increases the price from $285 per tonne to $315 per tonne.Annual Canadian production increases from 15 million tonnes to 17 million tonnes.What is the elasticity of supply of Canadian potash?

Which of the following illustrates elastic demand?

If the total expenditure on perfume increases when the price of perfume falls,the price elasticity of demand is

When a productʹs price has an inverse relationship with total expenditure,then demand has a price elasticity of

If the price elasticity of demand is 0.5,then a 10% increase in price results in a

Suppose the price elasticity of demand for good X is 1.5.If household income increases by 25%,ceteris paribus,what is the change in quantity demanded for good X?

Suppose egg producers succeed in permanently raising the price of their product by 15%,and as a result the quantity demanded falls by 15% in the short run.In the long run we can expect the quantity demanded to fall by

Cross-price elasticity of demand may be defined as

If the price elasticity of demand for some good is 2.7,a 10% increase in the price results in

We can expect that the income elasticity of demand for gourmet catered meals would be ________ the income elasticity of demand for basic groceries.

The price elasticity of demand for a product tends to be greater the

Income elasticity measures the change in quantity demanded of some product with respect to changes in

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1 -Refer to Table 4-1.The elasticity of demand for museum admissions is

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Consider the following data for a hypothetical economy. TABLE 4-5 -Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is. We can therefore conclude that these two goods are .