Question 1

Income elasticity of demand measures how

Accepted Answer

A) the quantity demanded changes as consumer income changes. 
B) consumer purchasing power is affected by a change in the price of a good. 
C) the price of a good is affected when there is a change in consumer income. 
D) many units of a good a consumer can buy given a certain income level. 
A) the quantity demanded changes as consumer income changes. 
B) consumer purchasing power is affected by a change in the price of a good. 
C) the price of a good is affected when there is a change in consumer income. 
D) many units of a good a consumer can buy given a certain income level.

Question 2

Scenario 5-6
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-6. Using the midpoint method, what is the income elasticity of demand for mobile service?

Accepted Answer

The answer of Scenario 5-6
Consider the markets for mobile and...

Question 3

Figure 5-4  
-Refer to Figure 5-4. The section of the demand curve from A to B represents the

Accepted Answer

A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve. 
A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve.

Question 4

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Accepted Answer

A) $20 and $40. 
B) $40 and $50. 
C) $40 and $60. 
D) $50 and $70. 
A) $20 and $40. 
B) $40 and $50. 
C) $40 and $60. 
D) $50 and $70.

Question 5

Table 5-4
The following table shows the demand schedule for a particular good.  
-Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

Accepted Answer

A) 0.4 
B) 1 
C) 1.5 
D) 2.33 
A) 0.4 
B) 1 
C) 1.5 
D) 2.33

Question 6

Figure 5-2  
-Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Accepted Answer

A) D1 
B) D2 
C) D3 
D) All of the above are equally elastic. 
A) D1 
B) D2 
C) D3 
D) All of the above are equally elastic.

Question 7

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A) 0.5, and supply is elastic. 
B) 0.5, and supply is inelastic. 
C) 2, and supply is inelastic. 
D) 2, and supply is elastic. 
A) 0.5, and supply is elastic. 
B) 0.5, and supply is inelastic. 
C) 2, and supply is inelastic. 
D) 2, and supply is elastic.

Question 8

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

Accepted Answer

A) 1.5% in the short run and 6% in the long run. 
B) 6% in the short run and 1.5% in the long run. 
C) 16.7% in the short run and 4.2% in the long run. 
D) 4.2% in the short run and 16.7% in the long run. 
A) 1.5% in the short run and 6% in the long run. 
B) 6% in the short run and 1.5% in the long run. 
C) 16.7% in the short run and 4.2% in the long run. 
D) 4.2% in the short run and 16.7% in the long run.

Question 9

The measure of how willing consumers are to buy less of a good as its price rises is called

Accepted Answer

price elas

Question 10

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 11

Goods with many close substitutes tend to have

Accepted Answer

A) more elastic demands. 
B) less elastic demands. 
C) price elasticities of demand that are unit elastic. 
D) income elasticities of demand that are negative. 
A) more elastic demands. 
B) less elastic demands. 
C) price elasticities of demand that are unit elastic. 
D) income elasticities of demand that are negative.

Question 12

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Accepted Answer

A) an inelastic demand for oil and a reduction in the amount of oil supplied. 
B) a reduction in the amount of oil supplied and a world-wide oil embargo. 
C) a world-wide oil embargo and an elastic demand for oil. 
D) a reduction in the amount of oil supplied and an elastic demand for oil. 
A) an inelastic demand for oil and a reduction in the amount of oil supplied. 
B) a reduction in the amount of oil supplied and a world-wide oil embargo. 
C) a world-wide oil embargo and an elastic demand for oil. 
D) a reduction in the amount of oil supplied and an elastic demand for oil.

Question 13

Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 14

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.2%. 
B) 0.5%. 
C) 2.0%. 
D) 4.5%. 
A) 0.2%. 
B) 0.5%. 
C) 2.0%. 
D) 4.5%.

Question 15

Figure 5-18  
-Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

Accepted Answer

A) 0.60 
B) 0.64 
C) 1.57 
D) 1.67 
A) 0.60 
B) 0.64 
C) 1.57 
D) 1.67

Question 16

Table 5-3
Consider the following demand schedule.  
-Refer to Table 5-3. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

Accepted Answer

The answer of Table 5-3
Consider the following demand schedule. ...

Question 17

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A) consumers to buy less of the good as price rises. 
B) consumers to avoid monopolistic markets in favor of competitive markets. 
C) firms to produce more of a good as price rises. 
D) firms to respond to the tastes of consumers. 
A) consumers to buy less of the good as price rises. 
B) consumers to avoid monopolistic markets in favor of competitive markets. 
C) firms to produce more of a good as price rises. 
D) firms to respond to the tastes of consumers.

Question 18

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Accepted Answer

Since Adam wants 10 tickets regardless o

Question 19

An advance in farm technology that results in an increased market supply is

Accepted Answer

A) good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B) bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C) good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D) bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue. 
A) good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B) bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C) good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D) bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 20

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Exam 5: Elasticity and Its Application

Income elasticity of demand measures how

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

The measure of how willing consumers are to buy less of a good as its price rises is called

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Goods with many close substitutes tend to have

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

The price elasticity of demand for a good measures the willingness of

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

An advance in farm technology that results in an increased market supply is

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

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