Question 1

Business people speak about cross elasticity of demand without using the actual term.Which one of the following statements reflects cross elasticity of demand?

Accepted Answer

A) "A price cut won't help me.It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line.What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters.Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) "Since the price of gasoline fell at the neighbouring station, my milk sales have been booming." 
A) "A price cut won't help me.It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line.What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters.Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) "Since the price of gasoline fell at the neighbouring station, my milk sales have been booming." E

Question 2

Fred's income increases from $840 per week to $1,160 per week.As a result,he decides to purchase 24 percent more bubble gum each week.The income elasticity of Fred's demand for bubble gum is

Accepted Answer

A) 0.32. 
B) 1.33. 
C) 24. 
D) 0.24. 
E) 0.75. 
A) 0.32. 
B) 1.33. 
C) 24. 
D) 0.24. 
E) 0.75. E

Question 3

Which one of the following illustrates an elastic demand?

Accepted Answer

A) A 10 percent rise in price leads to a 5 percent decrease in quantity demanded. 
B) A 10 percent rise in price leads to a 20 percent decrease in quantity demanded. 
C) A price elasticity of demand equal to 0.2. 
D) A price elasticity of demand equal to 1.0. 
E) A price elasticity of demand equal to zero. 
A) A 10 percent rise in price leads to a 5 percent decrease in quantity demanded. 
B) A 10 percent rise in price leads to a 20 percent decrease in quantity demanded. 
C) A price elasticity of demand equal to 0.2. 
D) A price elasticity of demand equal to 1.0. 
E) A price elasticity of demand equal to zero. B

Question 4

You are told that a 5 percent increase in the price of a good increases the quantity supplied by 10 percent after one month.Supply of this good is ________.This good is most likely produced using productive resources that are ________.

Accepted Answer

A) inelastic;plentiful or easily obtained 
B) decreasing;unique or rare 
C) elastic;plentiful or easily obtained 
D) unit elastic;unique or rare 
E) elastic;unique or rare 
A) inelastic;plentiful or easily obtained 
B) decreasing;unique or rare 
C) elastic;plentiful or easily obtained 
D) unit elastic;unique or rare 
E) elastic;unique or rare

Question 5

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the

Accepted Answer

A) cross elasticity of demand. 
B) income elasticity of demand. 
C) substitute elasticity of demand. 
D) price elasticity of demand. 
E) elasticity of supply. 
A) cross elasticity of demand. 
B) income elasticity of demand. 
C) substitute elasticity of demand. 
D) price elasticity of demand. 
E) elasticity of supply.

Question 6

If an increase in the supply of good A decreases the demand for good B,then

Accepted Answer

A) the demands for A and B are independent. 
B) the elasticity of supply for good A is greater than 1. 
C) A and B are complements. 
D) A and B are substitutes. 
E) the demand for A is price elastic. 
A) the demands for A and B are independent. 
B) the elasticity of supply for good A is greater than 1. 
C) A and B are complements. 
D) A and B are substitutes. 
E) the demand for A is price elastic.

Question 7

Suppose the price of a television set rises by 10 percent.Which one of the following would we expect to be the most elastic following such a price change?

Accepted Answer

A) the momentary supply of television sets 
B) the short-run supply of television sets 
C) the long-run supply of television sets 
D) the momentary demand for television sets 
E) the normal demand for television sets 
A) the momentary supply of television sets 
B) the short-run supply of television sets 
C) the long-run supply of television sets 
D) the momentary demand for television sets 
E) the normal demand for television sets

Question 8

If the cross elasticity of demand between beef and bison is 1.5,then a 3 percent increase in the price of beef will lead to

Accepted Answer

A) a 4.5 percent increase in the quantity of bison demanded. 
B) a 4.5 percent decrease in the quantity of bison demanded. 
C) a 2 percent increase in the quantity of bison demanded. 
D) a 2 percent decrease in the quantity of bison demanded. 
E) a 0.5 percent increase in the quantity of bison demanded. 
A) a 4.5 percent increase in the quantity of bison demanded. 
B) a 4.5 percent decrease in the quantity of bison demanded. 
C) a 2 percent increase in the quantity of bison demanded. 
D) a 2 percent decrease in the quantity of bison demanded. 
E) a 0.5 percent increase in the quantity of bison demanded.

Question 9

Suppose a fall from $110 to $90 in the price of playing golf on a public golf course results in an increase in the quantity of golf balls demanded (at the current price of golf balls)from 9,950 units to 10,050 units.The cross elasticity of demand of playing golf with respect to the price of golf balls is

Accepted Answer

A) -0.05. 
B) -0.1. 
C) 0.01. 
D) 0.08. 
E) 0.05. 
A) -0.05. 
B) -0.1. 
C) 0.01. 
D) 0.08. 
E) 0.05.

Question 10

Tina and Brian work for the same recording company.Tina claims they would be better off by raising the price of their CDs,while Brian claims they would be better off by lowering the price.We can conclude that

Accepted Answer

A) Tina thinks the demand for CDs has price elasticity of demand zero and Brian thinks price elasticity of demand equals 1. 
B) Tina thinks the demand for CDs has price elasticity of demand equal to 1 and Brian thinks price elasticity of demand equals zero. 
C) Tina thinks the demand for CDs is price elastic and Brian thinks it is price inelastic. 
D) Tina thinks the demand for CDs is price inelastic and Brian thinks it is price elastic. 
E) Tina and Brian should stick to singing and forget about economics. 
A) Tina thinks the demand for CDs has price elasticity of demand zero and Brian thinks price elasticity of demand equals 1. 
B) Tina thinks the demand for CDs has price elasticity of demand equal to 1 and Brian thinks price elasticity of demand equals zero. 
C) Tina thinks the demand for CDs is price elastic and Brian thinks it is price inelastic. 
D) Tina thinks the demand for CDs is price inelastic and Brian thinks it is price elastic. 
E) Tina and Brian should stick to singing and forget about economics.

Question 11

When the price of a good increased by 5 percent,the quantity demanded of it decreased 10 percent.The price elasticity of demand is ________.A price rise will ________ total revenue.

Accepted Answer

A) 2.0;decrease 
B) 0.5;decrease 
C) 2.0;increase 
D) 0.5;increase 
E) -2.0;decrease 
A) 2.0;decrease 
B) 0.5;decrease 
C) 2.0;increase 
D) 0.5;increase 
E) -2.0;decrease

Question 12

The price elasticity of demand for airplane travel one year in advance of the departure date is most likely to be

Accepted Answer

A) equal to infinity. 
B) equal to zero. 
C) between zero and 1. 
D) equal to 1. 
E) greater than 1. 
A) equal to infinity. 
B) equal to zero. 
C) between zero and 1. 
D) equal to 1. 
E) greater than 1.

Question 13

If a rise in the price of good A from $9 to $11 results in an increase in quantity supplied from 4,000 to 6,000 units,the elasticity of supply is

Accepted Answer

A) 0.5. 
B) 0.8. 
C) 1.0. 
D) 2.0. 
E) 20.0. 
A) 0.5. 
B) 0.8. 
C) 1.0. 
D) 2.0. 
E) 20.0.

Question 14

Total revenue is more likely to rise when the price falls if

Accepted Answer

A) there are few substitutes for the good. 
B) a low proportion of income is spent on the good. 
C) some extended period of time passes. 
D) all of the above. 
E) none of the above. 
A) there are few substitutes for the good. 
B) a low proportion of income is spent on the good. 
C) some extended period of time passes. 
D) all of the above. 
E) none of the above.

Question 15

If a rise in the price of good A from $9 to $11 results in an increase from 9,500 to 10,500 units supplied,then

Accepted Answer

A) supply is elastic. 
B) supply is inelastic. 
C) supply is unit elastic. 
D) demand is elastic. 
E) supply is perfectly inelastic. 
A) supply is elastic. 
B) supply is inelastic. 
C) supply is unit elastic. 
D) demand is elastic. 
E) supply is perfectly inelastic.

Question 16

If the cross elasticity of demand between two goods is -0.56,then a fall in the price of one good leads to a ________ shift in the ________ curve of the other good.

Accepted Answer

A) rightward;demand 
B) rightward;supply 
C) leftward;demand 
D) leftward;supply 
E) rightward;demand curve and the supply 
A) rightward;demand 
B) rightward;supply 
C) leftward;demand 
D) leftward;supply 
E) rightward;demand curve and the supply

Question 17

If the demand for salmon in Cape Breton Nova Scotia is unit elastic,the price elasticity of demand for salmon equals

Accepted Answer

A) 1.0. 
B) 100.0. 
C) 0.10. 
D) zero. 
E) 10.0. 
A) 1.0. 
B) 100.0. 
C) 0.10. 
D) zero. 
E) 10.0.

Question 18

The price elasticity of demand for airplane travel one week in advance of the departure date is most likely to be

Accepted Answer

A) equal to infinity. 
B) equal to zero. 
C) between zero and 1. 
D) equal to 1. 
E) greater than 1. 
A) equal to infinity. 
B) equal to zero. 
C) between zero and 1. 
D) equal to 1. 
E) greater than 1.

Question 19

If a turnip is an inferior good then

Accepted Answer

A) a small decrease in income decreases the quantity of turnips demanded at the current price by a large amount. 
B) a large decrease in income decreases the quantity of turnips demanded at the current price by a small amount. 
C) an increase in income increases the quantity demanded at the current price. 
D) an increase in income decreases the quantity demanded at the current price. 
E) turnips taste awful. 
A) a small decrease in income decreases the quantity of turnips demanded at the current price by a large amount. 
B) a large decrease in income decreases the quantity of turnips demanded at the current price by a small amount. 
C) an increase in income increases the quantity demanded at the current price. 
D) an increase in income decreases the quantity demanded at the current price. 
E) turnips taste awful.

Question 20

When price rises from $1.50 to $2.50,quantity supplied increases from 9,000 to 11,000 units.What is the price elasticity of supply?

Accepted Answer

A) 0.4 
B) 0.8 
C) 2.5 
D) 4.0 
E) -0.4 
A) 0.4 
B) 0.8 
C) 2.5 
D) 4.0 
E) -0.4

Exam 4: Elasticity

Business people speak about cross elasticity of demand without using the actual term.Which one of the following statements reflects cross elasticity of demand?

Fred's income increases from $840 per week to $1,160 per week.As a result,he decides to purchase 24 percent more bubble gum each week.The income elasticity of Fred's demand for bubble gum is

Which one of the following illustrates an elastic demand?

You are told that a 5 percent increase in the price of a good increases the quantity supplied by 10 percent after one month.Supply of this good is ________.This good is most likely produced using productive resources that are ________.

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the

If an increase in the supply of good A decreases the demand for good B,then

Suppose the price of a television set rises by 10 percent.Which one of the following would we expect to be the most elastic following such a price change?

If the cross elasticity of demand between beef and bison is 1.5,then a 3 percent increase in the price of beef will lead to

Tina and Brian work for the same recording company.Tina claims they would be better off by raising the price of their CDs,while Brian claims they would be better off by lowering the price.We can conclude that

When the price of a good increased by 5 percent,the quantity demanded of it decreased 10 percent.The price elasticity of demand is ________.A price rise will ________ total revenue.

The price elasticity of demand for airplane travel one year in advance of the departure date is most likely to be

If a rise in the price of good A from $9 to $11 results in an increase in quantity supplied from 4,000 to 6,000 units,the elasticity of supply is

Total revenue is more likely to rise when the price falls if

If a rise in the price of good A from $9 to $11 results in an increase from 9,500 to 10,500 units supplied,then

If the cross elasticity of demand between two goods is -0.56,then a fall in the price of one good leads to a ________ shift in the ________ curve of the other good.

If the demand for salmon in Cape Breton Nova Scotia is unit elastic,the price elasticity of demand for salmon equals

The price elasticity of demand for airplane travel one week in advance of the departure date is most likely to be

If a turnip is an inferior good then

When price rises from $1.50 to $2.50,quantity supplied increases from 9,000 to 11,000 units.What is the price elasticity of supply?

What Is Economics?

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

You are told that a 5 percent increase in the price of a good increases the quantity supplied by 10 percent after one month.Supply of this good is .This good is most likely produced using productive resources that are .

When the price of a good increased by 5 percent,the quantity demanded of it decreased 10 percent.The price elasticity of demand is .A price rise will total revenue.

If the cross elasticity of demand between two goods is -0.56,then a fall in the price of one good leads to a shift in the curve of the other good.