Question 1

FIGURE 4-2
-Refer to Figure 4-2. In diagram 2, the price elasticity of demand is

Accepted Answer

A)  0. 
B)  less than -1. 
C)  exactly 1. 
D)  greater than 1. 
E)  infinity. 
A)  0. 
B)  less than -1. 
C)  exactly 1. 
D)  greater than 1. 
E)  infinity.

Question 2

When national income falls, sales of vacation packages also fall, even at constant prices. This fact suggests that the elasticity of demand for vacation packages is .

Accepted Answer

A)  income; positive 
B)  income; negative 
C)  price; positive 
D)  price; negative 
E)  cross; positive 
A)  income; positive 
B)  income; negative 
C)  price; positive 
D)  price; negative 
E)  cross; positive

Question 3

Suppose the price of take-out pizza has been stable for many months at exactly $12.50 per pizza - and Olivier buys 6 pizzas per month at this price. When the price rises to $12.55 per pizza, Olivierʹs quantity demanded drops to zero. Apparently, Olivierʹs price elasticity of demand for take -out pizza is

Accepted Answer

A)  -1. 
B)  0. 
C)  100 
D)  6. 
E)  higher than 10 000. 
A)  -1. 
B)  0. 
C)  100 
D)  6. 
E)  higher than 10 000.

Question 4

FIGURE 4-2
-Refer to Figure 4-2. In diagram 1, the elasticity of demand at $10 is

Accepted Answer

A)  0. 
B)  less than 1. 
C)  exactly 1. 
D)  greater than 1. 
E)  infinity. 
A)  0. 
B)  less than 1. 
C)  exactly 1. 
D)  greater than 1. 
E)  infinity.

Question 5

An increase in income will

Accepted Answer

A)  increase the demand for SUVs if SUVs are inferior goods. 
B)  always increase the demand for SUVs. 
C)  increase the supply of SUVs. 
D)  decrease the demand for SUVs if SUVs have a very low price. 
E)  increase the demand for SUVs if SUVs are normal goods. 
A)  increase the demand for SUVs if SUVs are inferior goods. 
B)  always increase the demand for SUVs. 
C)  increase the supply of SUVs. 
D)  decrease the demand for SUVs if SUVs have a very low price. 
E)  increase the demand for SUVs if SUVs are normal goods.

Question 6

Demand Schedule for Ski Tickets
   TABLE 4-2
-Refer to Table 4-2. Price elasticity over the interval of the demand curve between prices of $90 and $70 is

Accepted Answer

A)  0.5. 
B)  2.0. 
C)  -0.5. 
D)  4.0. 
E)  1.0. 
A)  0.5. 
B)  2.0. 
C)  -0.5. 
D)  4.0. 
E)  1.0.

Question 7

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment. Given the information this provides about price elasticity of demand, what is the predicted effect on total expenditure on tuition fees?

Accepted Answer

A)  total expenditure will decrease 
B)  total expenditure will decrease by 7% 
C)  total expenditure will decrease by 3% 
D)  total expenditure will increase 
E)  total expenditure will remain constant 
A)  total expenditure will decrease 
B)  total expenditure will decrease by 7% 
C)  total expenditure will decrease by 3% 
D)  total expenditure will increase 
E)  total expenditure will remain constant

Question 8

Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the long-run price elasticity of demand is constant at 0.8. If a tax on gasoline causes the price to rise to
$1)50 per litre, then quantity demanded is predicted to fall in the long run by

Accepted Answer

A)  12% and total expenditure will fall. 
B)  24% and total expenditure will fall. 
C)  32% and total expenditure will fall. 
D)  24% and total expenditure will rise. 
E)  50% and total expenditure will rise. 
A)  12% and total expenditure will fall. 
B)  24% and total expenditure will fall. 
C)  32% and total expenditure will fall. 
D)  24% and total expenditure will rise. 
E)  50% and total expenditure will rise.

Question 9

Suppose you are shown two intersecting demand curves that are drawn on the same scale. At the point of intersection, one of the demand curves is steeper than the other. Which of the following could explain the difference in slopes?

Accepted Answer

A)  The steeper one has a higher income elasticity of demand. 
B)  The steeper one is probably the demand curve for a luxury good. 
C)  The steeper one applies for the short run whereas the flatter one applies for the long run. 
D)  The flatter one is for a good with no close substitutes. 
E)  It is not possible to compare the slopes of different demand curves. 
A)  The steeper one has a higher income elasticity of demand. 
B)  The steeper one is probably the demand curve for a luxury good. 
C)  The steeper one applies for the short run whereas the flatter one applies for the long run. 
D)  The flatter one is for a good with no close substitutes. 
E)  It is not possible to compare the slopes of different demand curves.

Question 10

As the price for some product decreases from $4.00 to $3.00 per unit, quantity demanded increases from 400 to 500 units per day. For this segment of the demand curve, the price elasticity of demand is

Accepted Answer

A)  7/9. 
B)  1. 
C)  9/7. 
D)  7. 
E)  9. 
A)  7/9. 
B)  1. 
C)  9/7. 
D)  7. 
E)  9.

Question 11

If household expenditures on electricity remain constant when the price of electricity increases, the price elasticity for electricity is

Accepted Answer

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

Question 12

For which of the following pairs of products would we expect the cross elasticity of demand to be negative?

Accepted Answer

A)  printers and toner cartridges 
B)  iPhones and BlackBerry smartphones 
C)  butter and margarine 
D)  LCD TVs and plasma TVs 
E)  acetaminophen and ibuprofen 
A)  printers and toner cartridges 
B)  iPhones and BlackBerry smartphones 
C)  butter and margarine 
D)  LCD TVs and plasma TVs 
E)  acetaminophen and ibuprofen

Question 13

FIGURE 4-2
-Refer to Figure 4-2. There is good reason to suppose that, of the four goods whose demand curves are shown in diagrams 1-4 of the figure, the good that has the fewest close substitutes is shown in

Accepted Answer

A)  diagram 1. 
B)  diagram 2. 
C)  diagram 3. 
D)  diagram 4. 
E)  There is not enough information to determine this. 
A)  diagram 1. 
B)  diagram 2. 
C)  diagram 3. 
D)  diagram 4. 
E)  There is not enough information to determine this.

Question 14

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
) A rise in the price of gasoline causes the demand curve for transit passes to shift to the .

Accepted Answer

A)  5.0; right 
B)  0.33; right 
C)  0.33; left 
D)  0.2; right 
E)  0.2; left 
A)  5.0; right 
B)  0.33; right 
C)  0.33; left 
D)  0.2; right 
E)  0.2; left

Question 15

Suppose the cross elasticity of demand for two goods, X and Y, is positive. If the price of Y falls, then quantity demanded will

Accepted Answer

A)  rise for both goods. 
B)  fall for both goods. 
C)  rise for X and fall for Y. 
D)  fall for X and rise for Y. 
E)  remain the same for both goods. 
A)  rise for both goods. 
B)  fall for both goods. 
C)  rise for X and fall for Y. 
D)  fall for X and rise for Y. 
E)  remain the same for both goods.

Question 16

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 17

The formula for the price elasticity of demand for a commodity can be written as which of the following?

Accepted Answer

A)  change in quantity demanded change in price 
B)  change in price change in quantity demanded 
C)  percentage change in quantity demanded percentage change in price 
D)  percentage change in price percentage change in quantity demanded 
E)  percentage change in one price percentage change in the other price 
A)  change in quantity demanded change in price 
B)  change in price change in quantity demanded 
C)  percentage change in quantity demanded percentage change in price 
D)  percentage change in price percentage change in quantity demanded 
E)  percentage change in one price percentage change in the other price

Question 18

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 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

A vertical demand curve shows that the price elasticity of demand is

Accepted Answer

A)  zero. 
B)  unity. 
C)  less than one. 
D)  infinity. 
E)  not defined. 
A)  zero. 
B)  unity. 
C)  less than one. 
D)  infinity. 
E)  not defined.

Exam 4: Elasticity

FIGURE 4-2 -Refer to Figure 4-2. In diagram 2, the price elasticity of demand is

When national income falls, sales of vacation packages also fall, even at constant prices. This fact suggests that the elasticity of demand for vacation packages is .

FIGURE 4-2 -Refer to Figure 4-2. In diagram 1, the elasticity of demand at $10 is

An increase in income will

Demand Schedule for Ski Tickets TABLE 4-2 -Refer to Table 4-2. Price elasticity over the interval of the demand curve between prices of $90 and $70 is

Suppose you are shown two intersecting demand curves that are drawn on the same scale. At the point of intersection, one of the demand curves is steeper than the other. Which of the following could explain the difference in slopes?

As the price for some product decreases from $4.00 to $3.00 per unit, quantity demanded increases from 400 to 500 units per day. For this segment of the demand curve, the price elasticity of demand is

If household expenditures on electricity remain constant when the price of electricity increases, the price elasticity for electricity is

For which of the following pairs of products would we expect the cross elasticity of demand to be negative?

FIGURE 4-2 -Refer to Figure 4-2. There is good reason to suppose that, of the four goods whose demand curves are shown in diagrams 1-4 of the figure, the good that has the fewest close substitutes is shown in

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 ) A rise in the price of gasoline causes the demand curve for transit passes to shift to the .

Suppose the cross elasticity of demand for two goods, X and Y, is positive. If the price of Y falls, then quantity demanded will

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

The formula for the price elasticity of demand for a commodity can be written as which of the following?

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

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

A vertical demand curve shows that the price elasticity of demand is

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, Interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Trade Policy

Exchange Rates and the Balance of Payments

Filters