Question 1

If the income elasticity of demand for some good is 2.4, a 10 percent increase in income results in

Accepted Answer

A)  a 240 percent decrease in quantity demanded. 
B)  a 240 percent increase in the quantity demanded. 
C)  a 24 percent increase in the quantity demanded. 
D)  a 24 percent decrease in quantity demanded. 
E)  a 2.4 percent increase in the quantity demanded. 
A)  a 240 percent decrease in quantity demanded. 
B)  a 240 percent increase in the quantity demanded. 
C)  a 24 percent increase in the quantity demanded. 
D)  a 24 percent decrease in quantity demanded. 
E)  a 2.4 percent increase in the quantity demanded.

Question 2

Suppose the cross- elasticity of demand between two goods, X and Y, is negative. If the price of X decreases, the quantity demanded will

Accepted Answer

A)  not change. 
B)  fall for both goods. 
C)  fall for X and rise for Y. 
D)  rise for both goods. 
E)  rise for X and fall for Y. 
A)  not change. 
B)  fall for both goods. 
C)  fall for X and rise for Y. 
D)  rise for both goods. 
E)  rise for X and fall for Y.

Question 3

For an inferior good, the quantity demanded

Accepted Answer

A)  responds directly to changes in income. 
B)  rises when income rises. 
C)  falls when income falls. 
D)  rises when income falls. 
E)  does not change when income rises or falls. 
A)  responds directly to changes in income. 
B)  rises when income rises. 
C)  falls when income falls. 
D)  rises when income falls. 
E)  does not change when income rises or falls.

Question 4

We can expect that the income elasticity of demand for gourmet catered meals would be the income elasticity of demand for meals from a fast- food restaurant.

Accepted Answer

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

Question 5

FIGURE 4- 3
-Refer to Figure 4- 3. The diagram shows a rightward shift in the demand curve for some good, and the short- run and long- run supply curves (SS and SL, respectively). In the new short- run equilibrium after the increase in demand, producers' revenue

Accepted Answer

A)  could be higher or lower than at E0, depending on the short- run elasticity of supply. 
B)  is unambiguously lower than at E0. 
C)  is unambiguously higher than at E0. 
D)  is unambiguously higher than at EL. 
E)  is unambiguously lower than in the long- run equilibrium at EL. 
A)  could be higher or lower than at E0, depending on the short- run elasticity of supply. 
B)  is unambiguously lower than at E0. 
C)  is unambiguously higher than at E0. 
D)  is unambiguously higher than at EL. 
E)  is unambiguously lower than in the long- run equilibrium at EL.

Question 6

Suppose national income is rising steadily at 2 percent per year over a 5- year period. Over the same time period, suppose quantity demanded for iPods and iPhones increases at 5 percent per year, but no other relevant variables are changing. We can conclude that the income elasticity for these products is and that these products are goods.

Accepted Answer

A)  0.4; inferior 
B)  2.5; luxury 
C)  10.0; necessities 
D)  4.0; necessities 
E)  4.0; normal 
A)  0.4; inferior 
B)  2.5; luxury 
C)  10.0; necessities 
D)  4.0; necessities 
E)  4.0; normal

Question 7

Consider the following data for a hypothetical economy. $\begin{array}{|l|c|c|c|}
\hline\text { Year } & \begin{array}{c}
\text { Average } \
\text { Household } \
\text { Income }(\$)
\end{array} & \begin{array}{c}
\text { Price of Transit } \
\text { Passes (\$) }
\end{array} & \begin{array}{c}
\text { Qty Demanded } \
\text { TransitPasses }
\end{array} \\hline 2009 & 78,000 & 60 & 99,000 \
\hline 2010 & 82,000 & 60 & 101,000 \
\hline
\end{array}$ TABLE 4- 4
-Refer to Table 4- 4. The income elasticity of demand for transit passes in this economy is

Accepted Answer

A)  2.5. 
B)  3.0 percent. 
C)  0.5. 
D)  2.5 percent. 
E)  0.4. 
A)  2.5. 
B)  3.0 percent. 
C)  0.5. 
D)  2.5 percent. 
E)  0.4.

Question 8

The price elasticity of demand measures the responsiveness of

Accepted Answer

A)  equilibrium changes 
B)  demand to supply changes. 
C)  the price to changes in quantity demanded. 
D)  supply to demand changes. 
E)  quantity demanded to changes in the price. 
A)  equilibrium changes 
B)  demand to supply changes. 
C)  the price to changes in quantity demanded. 
D)  supply to demand changes. 
E)  quantity demanded to changes in the price.

Question 9

Which of the following statements would you expect to be true about price elasticities of demand for T- shirts and clothing?

Accepted Answer

A)  Clothing has a higher price elasticity of demand because it is a necessity. 
B)  Clothing has a lower price elasticity of demand because it is more broadly defined. 
C)  Compared with clothing, T- shirts have a lower price elasticity of demand because they are specifically defined. 
D)  T- shirts would have the same price elasticity of demand as clothing. 
E)  Because T- shirts are clothing, but not all clothing is T- shirts, T- shirts would have a lower price elasticity of demand than clothing. 
A)  Clothing has a higher price elasticity of demand because it is a necessity. 
B)  Clothing has a lower price elasticity of demand because it is more broadly defined. 
C)  Compared with clothing, T- shirts have a lower price elasticity of demand because they are specifically defined. 
D)  T- shirts would have the same price elasticity of demand as clothing. 
E)  Because T- shirts are clothing, but not all clothing is T- shirts, T- shirts would have a lower price elasticity of demand than clothing.

Question 10

Which of the following tends to be true of the income elasticity of demand for food?

Accepted Answer

A)  At low levels of income, it tends to be fairly high; but as the level of income rises, it tends to fall. 
B)  It tends to be well above unity only at high levels of income. 
C)  It is usually zero, since we can only eat so much. 
D)  It tends to be well below unity only at low levels of income. 
E)  It tends to remain fairly constant at all levels of income. 
A)  At low levels of income, it tends to be fairly high; but as the level of income rises, it tends to fall. 
B)  It tends to be well above unity only at high levels of income. 
C)  It is usually zero, since we can only eat so much. 
D)  It tends to be well below unity only at low levels of income. 
E)  It tends to remain fairly constant at all levels of income.

Question 11

If demand is inelastic, an increase in price will cause total expenditure to

Accepted Answer

A)  fall to zero. 
B)  remain constant. 
C)  decrease. 
D)  increase. 
E)  be negative. 
A)  fall to zero. 
B)  remain constant. 
C)  decrease. 
D)  increase. 
E)  be negative.

Question 12

If the demand for some good fluctuates, but supply is constant, then which of the following combinations would generally yield the greatest quantity fluctuations?

Accepted Answer

A)  large demand fluctuations and inelastic supply 
B)  small demand fluctuations and elastic supply 
C)  small demand fluctuations and unit elastic supply 
D)  small demand fluctuations and inelastic supply 
E)  large demand fluctuations and elastic supply 
A)  large demand fluctuations and inelastic supply 
B)  small demand fluctuations and elastic supply 
C)  small demand fluctuations and unit elastic supply 
D)  small demand fluctuations and inelastic supply 
E)  large demand fluctuations and elastic supply

Question 13

An inferior good has

Accepted Answer

A)  a positive income elasticity of demand. 
B)  a positive income elasticity of demand and a price elasticity of demand greater than 1. 
C)  an income elasticity of demand greater than zero but less than 1. 
D)  a negative income elasticity of demand. 
E)  a negative price elasticity of demand. 
A)  a positive income elasticity of demand. 
B)  a positive income elasticity of demand and a price elasticity of demand greater than 1. 
C)  an income elasticity of demand greater than zero but less than 1. 
D)  a negative income elasticity of demand. 
E)  a negative price elasticity of demand.

Question 14

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

Accepted Answer

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

Question 15

Cross- price elasticity of demand may be defined as

Accepted Answer

A)  $\frac{\text {percentage change in quantity demanded of good $ x $  }}{\text {percentage change in income }}$ 
B)  $\frac{\text {percentage change inquantity demanded of good $ x $  }}{\text {percentage change in price of good $ Y $ }}$ 
C)  $\frac{\text {percentage change in price of good $ x $  }}{\text {percentage change in price of good $ Y $ }}$ 
D)  $\frac{\text {percentage change in quantity demanded of good $ x $  }}{\text { percentage change in price of good $ x $}}$ 
E)  $\frac{\text {percentage change in price of good $ Y $ }}{\text {percentage change in quantity demanded of good $ x $ }}$ 
A)  $\frac{\text {percentage change in quantity demanded of good $ x $  }}{\text {percentage change in income }}$ 
B)  $\frac{\text {percentage change inquantity demanded of good $ x $  }}{\text {percentage change in price of good $ Y $ }}$ 
C)  $\frac{\text {percentage change in price of good $ x $  }}{\text {percentage change in price of good $ Y $ }}$ 
D)  $\frac{\text {percentage change in quantity demanded of good $ x $  }}{\text { percentage change in price of good $ x $}}$ 
E)  $\frac{\text {percentage change in price of good $ Y $ }}{\text {percentage change in quantity demanded of good $ x $ }}$

Question 16

The table below shows the demand schedule for museum admissions in a small city. $\begin{array}{|c|c|}
\hline \begin{array}{c}
\text { Price } \
\text { (per visit } \
\text { per person) }\
\end{array} & \begin{array}{c}
\text { QuantityDemanded } \
\text { (thousands of }\\text { person-visits per year) }
\end{array} \
\hline \$ 10 & 2 \
\hline \$ 8 & 4 \
\hline \$ 6 & 6 \
\hline \$ 4 & 8 \
\hline \$ 2 & 10 \
\hline
\end{array}$ TABLE 4- 1
-Refer to Table 4- 1. The elasticity of demand for museum admissions is

Accepted Answer

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

Question 17

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 parts 1- 4 of the figure, the good that has the fewest close substitutes is shown in

Accepted Answer

A)  part 1. 
B)  part 2. 
C)  part 3. 
D)  part 4. 
E)  -- there is not enough information to even make a good guess. 
A)  part 1. 
B)  part 2. 
C)  part 3. 
D)  part 4. 
E)  -- there is not enough information to even make a good guess.

Question 18

If pizza and beer are complementary goods, we can conclude that

Accepted Answer

A)  the income elasticity of demand is negative. 
B)  their cross- elasticity of demand is negative. 
C)  the income elasticity of demand is positive. 
D)  both goods are inferior goods. 
E)  their cross- elasticity of demand is positive. 
A)  the income elasticity of demand is negative. 
B)  their cross- elasticity of demand is negative. 
C)  the income elasticity of demand is positive. 
D)  both goods are inferior goods. 
E)  their cross- elasticity of demand is positive.

Question 19

The imposition of an excise tax will cause the least burden on consumers when demand is

Accepted Answer

A)  elastic. 
B)  perfectly elastic. 
C)  unitary elastic. 
D)  vertical. 
E)  perfectly inelastic. 
A)  elastic. 
B)  perfectly elastic. 
C)  unitary elastic. 
D)  vertical. 
E)  perfectly inelastic.

Question 20

Suppose the market supply curve for some good is upward sloping. If the imposition of an excise tax causes no change in the equilibrium quantity sold in the market, the good's demand curve must be , meaning that the burden of the tax has fallen completely on the .

Accepted Answer

A)  unit elastic; government 
B)  vertical; firms 
C)  horizontal; consumers 
D)  horizontal; firms 
E)  vertical; consumers 
A)  unit elastic; government 
B)  vertical; firms 
C)  horizontal; consumers 
D)  horizontal; firms 
E)  vertical; consumers

If the income elasticity of demand for some good is 2.4, a 10 percent increase in income results in

Suppose the cross- elasticity of demand between two goods, X and Y, is negative. If the price of X decreases, the quantity demanded will

For an inferior good, the quantity demanded

We can expect that the income elasticity of demand for gourmet catered meals would be the income elasticity of demand for meals from a fast- food restaurant.

FIGURE 4- 3 -Refer to Figure 4- 3. The diagram shows a rightward shift in the demand curve for some good, and the short- run and long- run supply curves (SS and SL, respectively). In the new short- run equilibrium after the increase in demand, producers' revenue

The price elasticity of demand measures the responsiveness of

Which of the following statements would you expect to be true about price elasticities of demand for T- shirts and clothing?

Which of the following tends to be true of the income elasticity of demand for food?

If demand is inelastic, an increase in price will cause total expenditure to

If the demand for some good fluctuates, but supply is constant, then which of the following combinations would generally yield the greatest quantity fluctuations?

An inferior good has

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

Cross- price elasticity of demand may be defined as

The table below shows the demand schedule for museum admissions in a small city. Price (per visit per person) QuantityDemanded (thousands of person-visits per year) \ 10 2 \ 8 4 \ 6 6 \ 4 8 \ 2 10 TABLE 4- 1 -Refer to Table 4- 1. The elasticity of demand for museum admissions is

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 parts 1- 4 of the figure, the good that has the fewest close substitutes is shown in

If pizza and beer are complementary goods, we can conclude that

The imposition of an excise tax will cause the least burden on consumers when demand is

Suppose the market supply curve for some good is upward sloping. If the imposition of an excise tax causes no change in the equilibrium quantity sold in the market, the good's demand curve must be , meaning that the burden of the tax has fallen completely on the .

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Markets in Action

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters

Exam 4: Elasticity

If the income elasticity of demand for some good is 2.4, a 10 percent increase in income results in

Suppose the cross- elasticity of demand between two goods, X and Y, is negative. If the price of X decreases, the quantity demanded will

For an inferior good, the quantity demanded

We can expect that the income elasticity of demand for gourmet catered meals would be the income elasticity of demand for meals from a fast- food restaurant.

FIGURE 4- 3 -Refer to Figure 4- 3. The diagram shows a rightward shift in the demand curve for some good, and the short- run and long- run supply curves (SS and SL, respectively). In the new short- run equilibrium after the increase in demand, producers' revenue

The price elasticity of demand measures the responsiveness of

Which of the following statements would you expect to be true about price elasticities of demand for T- shirts and clothing?

Which of the following tends to be true of the income elasticity of demand for food?

If demand is inelastic, an increase in price will cause total expenditure to

If the demand for some good fluctuates, but supply is constant, then which of the following combinations would generally yield the greatest quantity fluctuations?

An inferior good has

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

Cross- price elasticity of demand may be defined as

The table below shows the demand schedule for museum admissions in a small city. Price (per visit per person) QuantityDemanded (thousands of person-visits per year) \ 10 2 \ 8 4 \ 6 6 \ 4 8 \ 2 10 TABLE 4- 1 -Refer to Table 4- 1. The elasticity of demand for museum admissions is

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 parts 1- 4 of the figure, the good that has the fewest close substitutes is shown in

If pizza and beer are complementary goods, we can conclude that

The imposition of an excise tax will cause the least burden on consumers when demand is

Suppose the market supply curve for some good is upward sloping. If the imposition of an excise tax causes no change in the equilibrium quantity sold in the market, the good's demand curve must be , meaning that the burden of the tax has fallen completely on the .

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Markets in Action

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters