Question 1

For which one of the following will demand be the most price inelastic?

Accepted Answer

A) milk 
B) Happy Cow brand milk 
C) Happy Cow brand milk in Regina 
D) Happy Cow brand milk at Ralph's Grocery Store in Regina 
E) All of the above will exhibit the same price elasticity of demand 
A) milk 
B) Happy Cow brand milk 
C) Happy Cow brand milk in Regina 
D) Happy Cow brand milk at Ralph's Grocery Store in Regina 
E) All of the above will exhibit the same price elasticity of demand

Question 2

The demand for good A is unit elastic if

Accepted Answer

A) a 5 percent fall in the price of A results in an infinite increase in the quantity of A demanded. 
B) a 5 percent rise in the price of A results in a 10 percent decrease in the quantity of A demanded. 
C) any increase in the price of A results in a 1 percent decrease in the quantity of A demanded. 
D) a 5 percent rise in the price of A results in no change in the quantity of A demanded. 
E) a 5 percent rise in the price of A results in a 5 percent decrease in the quantity of A demanded. 
A) a 5 percent fall in the price of A results in an infinite increase in the quantity of A demanded. 
B) a 5 percent rise in the price of A results in a 10 percent decrease in the quantity of A demanded. 
C) any increase in the price of A results in a 1 percent decrease in the quantity of A demanded. 
D) a 5 percent rise in the price of A results in no change in the quantity of A demanded. 
E) a 5 percent rise in the price of A results in a 5 percent decrease in the quantity of A demanded.

Question 3

If price elasticity of demand is zero,then as the price falls

Accepted Answer

A) total revenue does not change. 
B) quantity demanded does not change. 
C) quantity demanded falls to zero. 
D) total revenue increases from zero. 
E) None of the above occurs. 
A) total revenue does not change. 
B) quantity demanded does not change. 
C) quantity demanded falls to zero. 
D) total revenue increases from zero. 
E) None of the above occurs.

Question 4

If a large percentage fall in the price of good A results in a small percentage decrease in the quantity supplied,then

Accepted Answer

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

Question 5

When the quantity of coal is measured in kilograms instead of pounds,the demand for coal becomes

Accepted Answer

A) more elastic. 
B) less elastic. 
C) neither more nor less elastic. 
D) perfectly elastic. 
E) perfectly inelastic. 
A) more elastic. 
B) less elastic. 
C) neither more nor less elastic. 
D) perfectly elastic. 
E) perfectly inelastic.

Question 6

When the price elasticity of demand is ________,demand for the good is elastic.

Accepted Answer

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

Question 7

Fred's income increases from $800 per week to $1,200 per week.As a result,he decides to purchase 40 percent more bubble gum each week.The income elasticity of Fred's demand for bubble gum is

Accepted Answer

A) 0.40. 
B) 40. 
C) 1.0. 
D) 0.12. 
E) 10. 
A) 0.40. 
B) 40. 
C) 1.0. 
D) 0.12. 
E) 10.

Question 8

If the cross elasticity of demand between peanut butter and jelly is negative,then

Accepted Answer

A) a rise in the price of peanut butter results in a rise in the equilibrium price of jelly. 
B) a rise in the price of peanut butter results in a fall in the equilibrium price of jelly. 
C) a rise in the price of peanut butter has no effect on the equilibrium price of jelly. 
D) a fall in the price of peanut butter results in a fall in the equilibrium price of jelly. 
E) peanut butter and jelly are substitutes. 
A) a rise in the price of peanut butter results in a rise in the equilibrium price of jelly. 
B) a rise in the price of peanut butter results in a fall in the equilibrium price of jelly. 
C) a rise in the price of peanut butter has no effect on the equilibrium price of jelly. 
D) a fall in the price of peanut butter results in a fall in the equilibrium price of jelly. 
E) peanut butter and jelly are substitutes.

Question 9

Suppose the quantity of root beer demanded decreases from 105,000 litres per week to 95,000 litres per week when the price rises by 5 percent.The price elasticity of demand

Accepted Answer

A) is 2.0. 
B) is 0.5. 
C) is 10. 
D) is inelastic. 
E) cannot be computed unless we know the original price and the new price. 
A) is 2.0. 
B) is 0.5. 
C) is 10. 
D) is inelastic. 
E) cannot be computed unless we know the original price and the new price.

Question 10

The elasticity of supply for airplane travel one day in advance of the departure date is most likely to be

Accepted Answer

A) substantially lower than -1. 
B) between -1 and zero. 
C) between zero and 1. 
D) around 1. 
E) substantially greater than 1. 
A) substantially lower than -1. 
B) between -1 and zero. 
C) between zero and 1. 
D) around 1. 
E) substantially greater than 1.

Question 11

The longer the time that has elapsed since a price change the more time consumers will have to respond to price changes.As a result,demand becomes

Accepted Answer

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

Question 12

A fall in the price of X from $6 to $4 results in an increase in the quantity of Y demanded (at the current price of Y)from 900 to 1,100 units.What is the cross elasticity of demand between X and Y?

Accepted Answer

A) 0.5 
B) -0.5 
C) 2 
D) -2 
E) Either A or B, depending on whether X and Y are substitutes or complements. 
A) 0.5 
B) -0.5 
C) 2 
D) -2 
E) Either A or B, depending on whether X and Y are substitutes or complements.

Question 13

Use the figure below to answer the following questions.
   
Figure 4.1.2
-Suppose a fall in the price of a good from $10 to $8 leads to an increase in quantity demanded from 20 to 24 units.The price elasticity of demand is

Accepted Answer

A) 1. 
B) 9/11. 
C) 11/9. 
D) 2.0. 
E) 4.5/11. 
A) 1. 
B) 9/11. 
C) 11/9. 
D) 2.0. 
E) 4.5/11.

Question 14

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a

Accepted Answer

A) 2 percent decrease in quantity demanded. 
B) 20 percent decrease in quantity demanded. 
C) 5 percent decrease in quantity demanded. 
D) 2 percent increase in quantity demanded. 
E) 20 percent increase in quantity demanded. 
A) 2 percent decrease in quantity demanded. 
B) 20 percent decrease in quantity demanded. 
C) 5 percent decrease in quantity demanded. 
D) 2 percent increase in quantity demanded. 
E) 20 percent increase in quantity demanded.

Question 15

The demand for a good is perfectly elastic when the price elasticity of demand is

Accepted Answer

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

Question 16

Use the figure below to answer the following questions.
   
Figure 4.1.2
-A perfectly vertical demand curve indicates that the price elasticity of demand for the good is

Accepted Answer

A) zero. 
B) greater than zero but less than 1. 
C) 1. 
D) greater than 1. 
E) negative. 
A) zero. 
B) greater than zero but less than 1. 
C) 1. 
D) greater than 1. 
E) negative.

Question 17

Supply is elastic if

Accepted Answer

A) a small percentage change in price results in a large percentage change in quantity supplied. 
B) a large percentage change in price results in a small percentage change in quantity supplied. 
C) a small percentage change in demand results in a large percentage change in quantity supplied. 
D) the good is an inferior good. 
E) the good is a normal good. 
A) a small percentage change in price results in a large percentage change in quantity supplied. 
B) a large percentage change in price results in a small percentage change in quantity supplied. 
C) a small percentage change in demand results in a large percentage change in quantity supplied. 
D) the good is an inferior good. 
E) the good is a normal good.

Question 18

The cross elasticity of demand between any two goods is defined as the

Accepted Answer

A) percentage change in the quantity demanded of one good divided by the percentage change in the price of the other good. 
B) change in the price elasticity of demand for one good divided by the change in the price elasticity of demand for the other good. 
C) percentage change in the quantity of a good demanded divided by the percentage change in its price. 
D) percentage change in the quantity of a good demanded divided by the percentage change in income. 
E) percentage change in the price of one good divided by the percentage change in the price of the other good. 
A) percentage change in the quantity demanded of one good divided by the percentage change in the price of the other good. 
B) change in the price elasticity of demand for one good divided by the change in the price elasticity of demand for the other good. 
C) percentage change in the quantity of a good demanded divided by the percentage change in its price. 
D) percentage change in the quantity of a good demanded divided by the percentage change in income. 
E) percentage change in the price of one good divided by the percentage change in the price of the other good.

Question 19

If a rise in the price of good A from $100 to $120 results in an increase in quantity supplied from 10,000 to 12,000 units,then the elasticity of supply is

Accepted Answer

A) 0.625. 
B) 0.8. 
C) 1.25. 
D) 0.2. 
E) 1.0. 
A) 0.625. 
B) 0.8. 
C) 1.25. 
D) 0.2. 
E) 1.0.

Question 20

A union leader who claims that "higher wages increase living standards without causing unemployment" believes that the demand for labour is

Accepted Answer

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

Exam 4: Elasticity

For which one of the following will demand be the most price inelastic?

The demand for good A is unit elastic if

If price elasticity of demand is zero,then as the price falls

If a large percentage fall in the price of good A results in a small percentage decrease in the quantity supplied,then

When the quantity of coal is measured in kilograms instead of pounds,the demand for coal becomes

When the price elasticity of demand is ________,demand for the good is elastic.

Fred's income increases from $800 per week to $1,200 per week.As a result,he decides to purchase 40 percent more bubble gum each week.The income elasticity of Fred's demand for bubble gum is

If the cross elasticity of demand between peanut butter and jelly is negative,then

Suppose the quantity of root beer demanded decreases from 105,000 litres per week to 95,000 litres per week when the price rises by 5 percent.The price elasticity of demand

The elasticity of supply for airplane travel one day in advance of the departure date is most likely to be

The longer the time that has elapsed since a price change the more time consumers will have to respond to price changes.As a result,demand becomes

A fall in the price of X from $6 to $4 results in an increase in the quantity of Y demanded (at the current price of Y)from 900 to 1,100 units.What is the cross elasticity of demand between X and Y?

Use the figure below to answer the following questions. Figure 4.1.2 -Suppose a fall in the price of a good from $10 to $8 leads to an increase in quantity demanded from 20 to 24 units.The price elasticity of demand is

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a

The demand for a good is perfectly elastic when the price elasticity of demand is

Use the figure below to answer the following questions. Figure 4.1.2 -A perfectly vertical demand curve indicates that the price elasticity of demand for the good is

Supply is elastic if

The cross elasticity of demand between any two goods is defined as the

If a rise in the price of good A from $100 to $120 results in an increase in quantity supplied from 10,000 to 12,000 units,then the elasticity of supply is

A union leader who claims that "higher wages increase living standards without causing unemployment" believes that the demand for labour is

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