Question 1

During an economic boom, should investors invest in an industry that produces goods whose demand is income elastic or one in which the demand is income inelastic?

Accepted Answer

An industry that produces a good whose demand is income elastic will experience a greater percentage rise in the quantity demanded than an industry where the demand is income inelastic. Therefore, investors should invest in industries where the demand is income elastic.

Question 2

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?

Accepted Answer

A)  +0.625. 
B)  +0.74. 
C)  -1.0. 
D)  +1.36. 
E)  +1.6. 
A)  +0.625. 
B)  +0.74. 
C)  -1.0. 
D)  +1.36. 
E)  +1.6. E

Question 3

George is an art collector and he owns three Van Gogh paintings. George decides to destroy one of them. Explain why?

Accepted Answer

The supply of Van Gogh paintings is perfectly inelastic. There are no substitutes. Destroying one of the paintings will decrease the supply. This will lead to an increase in price of the remaining paintings. George believes that the demand for Van Gogh paintings is inelastic in the market period; thus the increase in price will increase total revenue.

Question 4

If people spend a large percentage of their income on a particular product, which of the following statements is true?

Accepted Answer

A)  The product has a large number of substitutes. 
B)  The price elasticity of demand for the product is high. 
C)  The income elasticity of demand for the product is low. 
D)  The elasticity of supply for the product is low. 
A)  The product has a large number of substitutes. 
B)  The price elasticity of demand for the product is high. 
C)  The income elasticity of demand for the product is low. 
D)  The elasticity of supply for the product is low.

Question 5

-Refer to the graph above to answer this question. What is the supply elasticity of S2 in the $2.50 to $4.00 range?

Accepted Answer

A)  1.15. 
B)  2.17. 
C)  It is higher than the supply elasticity of S1 in the same price range. 
D)  It is lower than the supply elasticity of S1 in the same price range. 
E)  None of the choices are correct. 
A)  1.15. 
B)  2.17. 
C)  It is higher than the supply elasticity of S1 in the same price range. 
D)  It is lower than the supply elasticity of S1 in the same price range. 
E)  None of the choices are correct.

Question 6

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
-Refer to the information above to answer this question. What is a demand when a change in quantity leaves total revenue unchanged?

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5. 
A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5.

Question 7

Suppose that average incomes decreased from $38,000 to $36,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?

Accepted Answer

A)  -0.27 
B)  -3.7 
C)  -1.0 
D)  +0.27 
E)  +3.7 
A)  -0.27 
B)  -3.7 
C)  -1.0 
D)  +0.27 
E)  +3.7

Question 8

The graph below shows the supply and demand for tickets to a Raptors basketball game.
  
-Refer to the graph above to answer this question. Which of the following statements is correct?

Accepted Answer

A)  If demand is D3, then all the tickets could not be sold. 
B)  If demand in D2, then there would be a shortage of tickets. 
C)  If the price of a ticket is $40 and demand is D2, then ticket scalping would result. 
D)  If the price of a ticket is $40 and demand is D3, then ticket scalping would result. 
E)  The supply curve is perfectly elastic and the demand curves are inelastic. 
A)  If demand is D3, then all the tickets could not be sold. 
B)  If demand in D2, then there would be a shortage of tickets. 
C)  If the price of a ticket is $40 and demand is D2, then ticket scalping would result. 
D)  If the price of a ticket is $40 and demand is D3, then ticket scalping would result. 
E)  The supply curve is perfectly elastic and the demand curves are inelastic.

Question 9

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
-Refer to the information above to answer this question. What is a demand when a firm can sell a constant amount at either a higher or a lower price?

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5. 
A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5.

Question 10

$\begin{array}{c}
\begin{array}{c}
 \text {Price}\
14\
16\
18\
20\
22 
\end{array}
\begin{array}{c}
\text {Quantity Demanded}\
220 \
200 \
180 \
160 \
140 
\end{array}
\end{array}$

-Refer to the information above to answer this question. What is the elasticity of demand in the $20 to $22 range?

Accepted Answer

A)  0.02. 
B)  0.7. 
C)  1.4. 
D)  2.1. 
E)  3.33. 
A)  0.02. 
B)  0.7. 
C)  1.4. 
D)  2.1. 
E)  3.33.

Question 11

The following graph shows the demand and supply for i-Pods.   a) What is equilibrium price and quantity?
b) Suppose that a $20 per unit sales tax is placed on the product. Draw in the new supply curve labeled Stax.
c) What is the new equilibrium price and quantity?
d) What proportion of the tax is paid by the consumer, and what proportion is paid by the seller in this case?

Accepted Answer

a) $60 and 200
b) Se

Question 12

-Refer to the graph above to answer this question. Which of the following statements is correct?

Accepted Answer

A)  The demand curve in I is perfectly elastic. 
B)  The demand curve is II is unitary elastic. 
C)  The demand curve in III is perfectly inelastic. 
D)  The demand curve in I is unitary elastic. 
A)  The demand curve in I is perfectly elastic. 
B)  The demand curve is II is unitary elastic. 
C)  The demand curve in III is perfectly inelastic. 
D)  The demand curve in I is unitary elastic.

Question 13

How can income elasticity be used to determine whether a good is normal or inferior?

Accepted Answer

The sign of the income elastic

Question 14

Below are some data on price, income and demand for five different time periods.
 $$\begin{array} { l l c c c c } 
\text { Year } & \text { Income } & \text { Price of X } & \begin{array} { l } 
\text { Quantity } \
\text { Demanded } \
\text { of } \mathbf { X}
\end{array} & \text { Price of Y } & \begin{array} { l } 
\text { Quantity } \
\text { Demanded } \
\text { of Y }
\end{array} \
1 & \$ 40000 & \$ 140 & 50 & \$ 40 & 200 \
2 & 40000 & 150 & 40 & 40 & 160 \
3 & 40000 & 150 & 30 & 70 & 140 \
4 & 50000 & 150 & 40 & 70 & 160 \
5 & 50000 & 160 & 50 & 90 & 200
\end{array}$$
-Refer to the information above to answer this question. What is the price elasticity of demand for product X between years 1 and 2?

Accepted Answer

A)  0.31. 
B)  1.0. 
C)  3.2. 
D)  22.2. 
A)  0.31. 
B)  1.0. 
C)  3.2. 
D)  22.2.

Question 15

What do products such as household electricity, tobacco and toothpicks have in common?

Accepted Answer

A)  They are all inferior goods. 
B)  They all are likely to have incomes elasticities greater than one. 
C)  The demand for all three goods is elastic. 
D)  The demand for all three goods is inelastic. 
E)  They all have a large number of substitute goods. 
A)  They are all inferior goods. 
B)  They all are likely to have incomes elasticities greater than one. 
C)  The demand for all three goods is elastic. 
D)  The demand for all three goods is inelastic. 
E)  They all have a large number of substitute goods.

Question 16

What is income elasticity?

Accepted Answer

A)  The change in the quantity supplied as a result of a change in price. 
B)  The responsiveness of the change in the quantity demanded to a change in the price of a product. 
C)  The change in the price of a product as a result of a change in supply. 
D)  The responsiveness of the quantity demanded to a given change in income. 
A)  The change in the quantity supplied as a result of a change in price. 
B)  The responsiveness of the change in the quantity demanded to a change in the price of a product. 
C)  The change in the price of a product as a result of a change in supply. 
D)  The responsiveness of the quantity demanded to a given change in income.

Question 17

The price elasticity of demand for keyboards is 2.5. If the percentage change in quantity demanded is 50% and the average price is $10, what is the change in price?

Accepted Answer

The answer of The price elasticity of demand for keyboards...

Question 18

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

Accepted Answer

The cross-price elasticity is the percen

Question 19

The graph below illustrates three demand curves.
  
-Refer to the graph above to answer this question. Which of the following statements is correct?

Accepted Answer

A)  Demand curve D3 is the most inelastic demand. 
B)  Equilibrium price must be $50. 
C)  If price is $30 and demand is D3 then the quantity demanded is 720 units per day. 
D)  Demand curve D1 is more inelastic than D3. 
E)  Demand curve D1 is perfectly elastic. 
A)  Demand curve D3 is the most inelastic demand. 
B)  Equilibrium price must be $50. 
C)  If price is $30 and demand is D3 then the quantity demanded is 720 units per day. 
D)  Demand curve D1 is more inelastic than D3. 
E)  Demand curve D1 is perfectly elastic.

Question 20

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208. What is the value of the cross elasticity?

Accepted Answer

A)  + 0.2. 
B)  + 0.4. 
C)  + 1.0. 
D)  + 2.5. 
E)  + 5.0. 
A)  + 0.2. 
B)  + 0.4. 
C)  + 1.0. 
D)  + 2.5. 
E)  + 5.0.

During an economic boom, should investors invest in an industry that produces goods whose demand is income elastic or one in which the demand is income inelastic?

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?

George is an art collector and he owns three Van Gogh paintings. George decides to destroy one of them. Explain why?

If people spend a large percentage of their income on a particular product, which of the following statements is true?

-Refer to the graph above to answer this question. What is the supply elasticity of S₂ in the $2.50 to $4.00 range?

The list below refers to the price elasticity of demand. 1) perfectly inelastic 2) perfectly elastic 3) unitary elasticity 4) elastic 5) inelastic -Refer to the information above to answer this question. What is a demand when a change in quantity leaves total revenue unchanged?

Suppose that average incomes decreased from $38,000 to $36,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?

The graph below shows the supply and demand for tickets to a Raptors basketball game. -Refer to the graph above to answer this question. Which of the following statements is correct?

The list below refers to the price elasticity of demand. 1) perfectly inelastic 2) perfectly elastic 3) unitary elasticity 4) elastic 5) inelastic -Refer to the information above to answer this question. What is a demand when a firm can sell a constant amount at either a higher or a lower price?

Price 14 16 18 20 22 Quantity Demanded 220 200 180 160 140 -Refer to the information above to answer this question. What is the elasticity of demand in the $20 to $22 range?

-Refer to the graph above to answer this question. Which of the following statements is correct?

How can income elasticity be used to determine whether a good is normal or inferior?

What do products such as household electricity, tobacco and toothpicks have in common?

What is income elasticity?

The price elasticity of demand for keyboards is 2.5. If the percentage change in quantity demanded is 50% and the average price is $10, what is the change in price?

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question. Which of the following statements is correct?

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208. What is the value of the cross elasticity?

The Economic Problem

Demand and Supply: an Introduction

Demand and Supply: an Elaboration

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

Exam 4: Elasticity

During an economic boom, should investors invest in an industry that produces goods whose demand is income elastic or one in which the demand is income inelastic?

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?

George is an art collector and he owns three Van Gogh paintings. George decides to destroy one of them. Explain why?

If people spend a large percentage of their income on a particular product, which of the following statements is true?

-Refer to the graph above to answer this question. What is the supply elasticity of S2 in the $2.50 to $4.00 range?

The list below refers to the price elasticity of demand. 1) perfectly inelastic 2) perfectly elastic 3) unitary elasticity 4) elastic 5) inelastic -Refer to the information above to answer this question. What is a demand when a change in quantity leaves total revenue unchanged?

Suppose that average incomes decreased from $38,000 to $36,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?

The graph below shows the supply and demand for tickets to a Raptors basketball game. -Refer to the graph above to answer this question. Which of the following statements is correct?

The list below refers to the price elasticity of demand. 1) perfectly inelastic 2) perfectly elastic 3) unitary elasticity 4) elastic 5) inelastic -Refer to the information above to answer this question. What is a demand when a firm can sell a constant amount at either a higher or a lower price?

Price 14 16 18 20 22 Quantity Demanded 220 200 180 160 140 -Refer to the information above to answer this question. What is the elasticity of demand in the $20 to $22 range?

-Refer to the graph above to answer this question. Which of the following statements is correct?

How can income elasticity be used to determine whether a good is normal or inferior?

What do products such as household electricity, tobacco and toothpicks have in common?

What is income elasticity?

The price elasticity of demand for keyboards is 2.5. If the percentage change in quantity demanded is 50% and the average price is $10, what is the change in price?

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question. Which of the following statements is correct?

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208. What is the value of the cross elasticity?

The Economic Problem

Demand and Supply: an Introduction

Demand and Supply: an Elaboration

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

-Refer to the graph above to answer this question. What is the supply elasticity of S₂ in the $2.50 to $4.00 range?