Question 1

Producers will bear a larger burden of a sales tax if

Accepted Answer

A)  demand is relatively elastic and supply is relatively inelastic. 
B)  demand is relatively inelastic and supply is relatively elastic. 
C)  both demand and supply are relatively elastic. 
D)  both demand and supply are relatively inelastic. 
E)  the tax is collected by firms rather than remitted directly to the government by consumers. 
A)  demand is relatively elastic and supply is relatively inelastic. 
B)  demand is relatively inelastic and supply is relatively elastic. 
C)  both demand and supply are relatively elastic. 
D)  both demand and supply are relatively inelastic. 
E)  the tax is collected by firms rather than remitted directly to the government by consumers.

Question 2

An increase in income will

Accepted Answer

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

Question 3

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%, then her income elasticity of demand for music downloads is

Accepted Answer

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

Question 4

When the percentage change in quantity demanded resulting from a price change is less than the percentage change in price, demand is said to be

Accepted Answer

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

Question 5

During the 1970s, OPEC's output restrictions caused gasoline prices to increase sharply. Coincidentally, demand for gas- guzzling cars fell. A likely explanation for these observations is that gasoline and cars had a elasticity of demand that was .

Accepted Answer

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

Question 6

The formula for income elasticity of demand may be written as which of the following?

Accepted Answer

A)  change in quantity demanded change in income 
B)  percentage change in income percentage change in quantity demanded 
C)  percentage change in quantity demanded percentage change in income 
D)  change in income change in quantity demanded 
E)  percentage change in quantity demanded percentage change in price 
A)  change in quantity demanded change in income 
B)  percentage change in income percentage change in quantity demanded 
C)  percentage change in quantity demanded percentage change in income 
D)  change in income change in quantity demanded 
E)  percentage change in quantity demanded percentage change in price

Question 7

Consumers will bear a larger burden of an excise tax if

Accepted Answer

A)  demand is relatively elastic and supply is relatively inelastic. 
B)  the tax is collected by firms rather than remitted directly to the government by consumers. 
C)  both demand and supply are relatively elastic. 
D)  both demand and supply are relatively inelastic. 
E)  demand is relatively inelastic and supply is relatively elastic. 
A)  demand is relatively elastic and supply is relatively inelastic. 
B)  the tax is collected by firms rather than remitted directly to the government by consumers. 
C)  both demand and supply are relatively elastic. 
D)  both demand and supply are relatively inelastic. 
E)  demand is relatively inelastic and supply is relatively elastic.

Question 8

If the total expenditure on clothing decreases when the price of clothing falls, the price elasticity of demand is

Accepted Answer

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

Question 9

Income elasticity of demand measures the extent to which

Accepted Answer

A)  one household's income changes when there is a change in the income of another household. 
B)  the quantity demanded of a good changes when income changes. 
C)  the price of a good changes when there is a change in income. 
D)  quantity demanded changes when there is a change in price. 
E)  real household income changes when there is a change in the price of a good. 
A)  one household's income changes when there is a change in the income of another household. 
B)  the quantity demanded of a good changes when income changes. 
C)  the price of a good changes when there is a change in income. 
D)  quantity demanded changes when there is a change in price. 
E)  real household income changes when there is a change in the price of a good.

Question 10

An upward- sloping straight- line supply curve through the origin has an elasticity of

Accepted Answer

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

Question 11

A demand curve that is the shape of a rectangular hyperbola

Accepted Answer

A)  is inelastic over the whole curve. 
B)  has the same elasticity as a straight- line demand curve. 
C)  is elastic over the whole curve. 
D)  has an elasticity of 100 percent over the whole curve. 
E)  is unit elastic over the whole curve. 
A)  is inelastic over the whole curve. 
B)  has the same elasticity as a straight- line demand curve. 
C)  is elastic over the whole curve. 
D)  has an elasticity of 100 percent over the whole curve. 
E)  is unit elastic over the whole curve.

Question 12

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

Accepted Answer

A)  aceteminophen and ibuprofen 
B)  butter and margarine 
C)  iPhones and Blackberries 
D)  printers and toner cartridges 
E)  HD TVs and plasma TVs 
A)  aceteminophen and ibuprofen 
B)  butter and margarine 
C)  iPhones and Blackberries 
D)  printers and toner cartridges 
E)  HD TVs and plasma TVs

Question 13

Which of the following illustrates elastic demand?

Accepted Answer

A)  A 10 percent increase in price causes a 5 percent decrease in quantity demanded. 
B)  A 10 percent increase in price causes a 10 percent reduction in quantity demanded. 
C)  A 10 percent increase in price causes a 20 percent decrease in quantity demanded. 
D)  a price elasticity of 0.8 
E)  a price elasticity of 1.0 
A)  A 10 percent increase in price causes a 5 percent decrease in quantity demanded. 
B)  A 10 percent increase in price causes a 10 percent reduction in quantity demanded. 
C)  A 10 percent increase in price causes a 20 percent decrease in quantity demanded. 
D)  a price elasticity of 0.8 
E)  a price elasticity of 1.0

Question 14

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

Question 15

Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litres per week as a result of a 10 percent increase in its price. The price elasticity of demand for lemonade is therefore

Accepted Answer

A)  6.0. 
B)  1.03. 
C)  0.6. 
D)  1.97. 
E)  impossible to compute unless we know the before and after prices. 
A)  6.0. 
B)  1.03. 
C)  0.6. 
D)  1.97. 
E)  impossible to compute unless we know the before and after prices.

Question 16

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

Accepted Answer

A)  1.0 
B)  4.0 
C)  0.5 
D)  2.0 
E)  1.5 
A)  1.0 
B)  4.0 
C)  0.5 
D)  2.0 
E)  1.5

Question 17

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

Accepted Answer

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

Question 18

Consider the following data for a hypothetical economy. $$\begin{array}{l}
\begin{array} { | l | l | l | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Average } \
\text { Household } \
\text { Income } ( \$ )
\end{array} & \begin{array} { l } 
\text { Price of } \
\text { Transit Passes }
\end{array} & \begin{array} { l } 
\text { Qty } \
\text { Demanded of } \
\text { Transit Passes }
\end{array} & \begin{array} { l } 
\text { Price of } \
\text { Gasoline } \
\text { (\$/litre) }
\end{array} & \begin{array} { l } 
\text { Qty Demanded } \
\text { of Gasoline } \
\text { (millions of litres) }
\end{array} \
\hline 2009 & 80000 & 60 & 99000 & 0.95 & 1940 \
\hline 2010 & 80000 & 60 & 101000 & 1.05 & 2060 \
\hline
\end{array}\
\text { TABLE } 4-5
\end{array}$$
-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)  0.2; right 
B)  0.2; left 
C)  5.0; right 
D)  0.33; left 
E)  0.33; right 
A)  0.2; right 
B)  0.2; left 
C)  5.0; right 
D)  0.33; left 
E)  0.33; right

Question 19

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

Accepted Answer

A)  Compared with food, cornflakes has a lower price elasticity of demand because it is specifically defined. 
B)  Food has a lower price elasticity of demand than cornflakes because it is more broadly defined. 
C)  Food has a higher price elasticity of demand because it is a necessity. 
D)  Because cornflakes is food, cornflakes would have the same price elasticity of demand as food. 
E)  Because cornflakes is food, but not all food is cornflakes, cornflakes would have a lower price elasticity of demand. 
A)  Compared with food, cornflakes has a lower price elasticity of demand because it is specifically defined. 
B)  Food has a lower price elasticity of demand than cornflakes because it is more broadly defined. 
C)  Food has a higher price elasticity of demand because it is a necessity. 
D)  Because cornflakes is food, cornflakes would have the same price elasticity of demand as food. 
E)  Because cornflakes is food, but not all food is cornflakes, cornflakes would have a lower price elasticity of demand.

Question 20

When a product's price has an inverse relationship with total expenditure, then demand has a price elasticity of

Accepted Answer

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

Producers will bear a larger burden of a sales tax if

An increase in income will

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%, then her income elasticity of demand for music downloads is

When the percentage change in quantity demanded resulting from a price change is less than the percentage change in price, demand is said to be

During the 1970s, OPEC's output restrictions caused gasoline prices to increase sharply. Coincidentally, demand for gas- guzzling cars fell. A likely explanation for these observations is that gasoline and cars had a elasticity of demand that was .

The formula for income elasticity of demand may be written as which of the following?

Consumers will bear a larger burden of an excise tax if

If the total expenditure on clothing decreases when the price of clothing falls, the price elasticity of demand is

Income elasticity of demand measures the extent to which

An upward- sloping straight- line supply curve through the origin has an elasticity of

A demand curve that is the shape of a rectangular hyperbola

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

Which of the following illustrates elastic demand?

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

Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litres per week as a result of a 10 percent increase in its price. The price elasticity of demand for lemonade is therefore

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

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

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

When a product's price has an inverse relationship with total expenditure, then demand has a price elasticity of

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

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Exam 4: Elasticity

Producers will bear a larger burden of a sales tax if

An increase in income will

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%, then her income elasticity of demand for music downloads is

When the percentage change in quantity demanded resulting from a price change is less than the percentage change in price, demand is said to be

During the 1970s, OPEC's output restrictions caused gasoline prices to increase sharply. Coincidentally, demand for gas- guzzling cars fell. A likely explanation for these observations is that gasoline and cars had a elasticity of demand that was .

The formula for income elasticity of demand may be written as which of the following?

Consumers will bear a larger burden of an excise tax if

If the total expenditure on clothing decreases when the price of clothing falls, the price elasticity of demand is

Income elasticity of demand measures the extent to which

An upward- sloping straight- line supply curve through the origin has an elasticity of

A demand curve that is the shape of a rectangular hyperbola

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

Which of the following illustrates elastic demand?

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

Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litres per week as a result of a 10 percent increase in its price. The price elasticity of demand for lemonade is therefore

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

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

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

When a product's price has an inverse relationship with total expenditure, then demand has a price elasticity of

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