Question 1

The formal definition of price elasticity of demand is

Accepted Answer

A) change in quantity demanded divided by change in price. 
B) quantity demanded divided by price. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) quantity demanded multiplied by price and divided by 100. 
A) change in quantity demanded divided by change in price. 
B) quantity demanded divided by price. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) quantity demanded multiplied by price and divided by 100.

Question 2

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

A) Existence of substitutes 
B) Expenditures on the good as a share of a consumer's budget 
C) The amount of time allowed for adjustment to changes in the price of the commodity 
D) The price level in a country 
A) Existence of substitutes 
B) Expenditures on the good as a share of a consumer's budget 
C) The amount of time allowed for adjustment to changes in the price of the commodity 
D) The price level in a country

Question 3

When the absolute price elasticity of demand is greater than 1, demand is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) undetermined without more information. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) undetermined without more information.

Question 4

-Refer to the above table. For which prices is demand elastic?

Accepted Answer

A) In a range of prices below $6.50 
B) In a range of prices above $6.50 
C) In a range of prices between $5 and $10 
D) In a range of prices above $9.00 
A) In a range of prices below $6.50 
B) In a range of prices above $6.50 
C) In a range of prices between $5 and $10 
D) In a range of prices above $9.00

Question 5

An inelastic demand indicates that

Accepted Answer

A) quantity demanded does not vary with changes in the price. 
B) relatively small changes in price lead to relatively large changes in quantity demanded. 
C) relatively large changes in price are required to obtain a relatively small change in quantity demanded. 
D) relatively large changes in quantity demanded lead to relatively large changes in price. 
A) quantity demanded does not vary with changes in the price. 
B) relatively small changes in price lead to relatively large changes in quantity demanded. 
C) relatively large changes in price are required to obtain a relatively small change in quantity demanded. 
D) relatively large changes in quantity demanded lead to relatively large changes in price.

Question 6

Total revenues reach a maximum when

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) demand is unit-elastic. 
D) price elasticity is at a minimum. 
A) demand is elastic. 
B) demand is inelastic. 
C) demand is unit-elastic. 
D) price elasticity is at a minimum.

Question 7

A demand relationship in which a given percentage change in price will result in a larger percentage change in quantity demanded is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) consistent with zero elasticity. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) consistent with zero elasticity.

Question 8

-Refer to the above figure. Demand is

Accepted Answer

A) perfectly elastic. 
B) unitary elastic. 
C) perfectly inelastic. 
D) undetermined without more information. 
A) perfectly elastic. 
B) unitary elastic. 
C) perfectly inelastic. 
D) undetermined without more information.

Question 9

Which has a more elastic demand: hamburger or beef?

Accepted Answer

Hamburger has the more elastic demand be

Question 10

The price elasticity of supply measures

Accepted Answer

A) the responsiveness of quantity demanded to a change in price. 
B) the responsiveness of quantity supplied to a change in price. 
C) the change in supply due to a change in input prices. 
D) the change in price due to a change in quantity supplied. 
A) the responsiveness of quantity demanded to a change in price. 
B) the responsiveness of quantity supplied to a change in price. 
C) the change in supply due to a change in input prices. 
D) the change in price due to a change in quantity supplied.

Question 11

While the slope of the perfectly inelastic supply curve ________, the slope of the perfectly elastic supply curve ________.

Accepted Answer

A) is zero, approaches infinity 
B) approaches infinity, is zero 
C) is zero, is zero 
D) approaches infinity, approaches infinity 
A) is zero, approaches infinity 
B) approaches infinity, is zero 
C) is zero, is zero 
D) approaches infinity, approaches infinity

Question 12

-Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be

Accepted Answer

A) horizontal. 
B) steeper. 
C) shallower. 
D) vertical. 
A) horizontal. 
B) steeper. 
C) shallower. 
D) vertical.

Question 13

-An elastic response in the quantity of a good demanded would be caused by

Accepted Answer

A) the availability of many substitutes. 
B) a lack of substitutes. 
C) a lack of sensitivity to the good's price. 
D) the good representing a small portion of a person's budget. 
A) the availability of many substitutes. 
B) a lack of substitutes. 
C) a lack of sensitivity to the good's price. 
D) the good representing a small portion of a person's budget.

Question 14

Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers should

Accepted Answer

A) increase the price of the newsletters. 
B) reduce the price of the newsletters. 
C) sell the newsletters on the inelastic portion of its demand curve. 
D) keep the price the same. 
A) increase the price of the newsletters. 
B) reduce the price of the newsletters. 
C) sell the newsletters on the inelastic portion of its demand curve. 
D) keep the price the same.

Question 15

Given a price elasticity of demand of -0.33, a decrease in price will

Accepted Answer

A) reduce total revenue. 
B) increase total revenue. 
C) leave total revenue unchanged. 
D) decrease quantity. 
A) reduce total revenue. 
B) increase total revenue. 
C) leave total revenue unchanged. 
D) decrease quantity.

Question 16

The word best associated with price elasticity of demand is

Accepted Answer

A) relative. 
B) total. 
C) absolute. 
D) cumulative. 
A) relative. 
B) total. 
C) absolute. 
D) cumulative.

Question 17

Chad's income went from $1000 per week to $1500 per week. As a result he increased his consumption of steak from 1 pound a week to 3 pounds a week. Based on his consumption patterns, the income elasticity of steak for Chad is

Accepted Answer

A) 2.50. 
B) -.50. 
C) .50. 
D) -1.50. 
A) 2.50. 
B) -.50. 
C) .50. 
D) -1.50.

Question 18

In an extreme hypothetical instance in which the price change of a good elicited no change in quantity demanded, we would say that the item is

Accepted Answer

A) perfectly elastic. 
B) perfectly inelastic. 
C) infinitely elastic. 
D) unitary elastic. 
A) perfectly elastic. 
B) perfectly inelastic. 
C) infinitely elastic. 
D) unitary elastic.

Question 19

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

Accepted Answer

A) 0.85 
B) 1.08 
C) 1.17 
D) 0.92 
A) 0.85 
B) 1.08 
C) 1.17 
D) 0.92

Question 20

When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals ________ and the tickets are a(n)________ good for Mary.

Accepted Answer

A) -1.36; normal 
B) -0.21; inferior 
C) +0.21; complementary 
D) +0.73; normal 
A) -1.36; normal 
B) -0.21; inferior 
C) +0.21; complementary 
D) +0.73; normal

Exam 19: Demand and Supply Elasticity

The formal definition of price elasticity of demand is

Which of the following is NOT a determinant of the price elasticity of demand?

When the absolute price elasticity of demand is greater than 1, demand is

-Refer to the above table. For which prices is demand elastic?

An inelastic demand indicates that

Total revenues reach a maximum when

A demand relationship in which a given percentage change in price will result in a larger percentage change in quantity demanded is

-Refer to the above figure. Demand is

Which has a more elastic demand: hamburger or beef?

The price elasticity of supply measures

While the slope of the perfectly inelastic supply curve ________, the slope of the perfectly elastic supply curve ________.

-Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be

-An elastic response in the quantity of a good demanded would be caused by

Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers should

Given a price elasticity of demand of -0.33, a decrease in price will

The word best associated with price elasticity of demand is

Chad's income went from $1000 per week to $1500 per week. As a result he increased his consumption of steak from 1 pound a week to 3 pounds a week. Based on his consumption patterns, the income elasticity of steak for Chad is

In an extreme hypothetical instance in which the price change of a good elicited no change in quantity demanded, we would say that the item is

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

While the slope of the perfectly inelastic supply curve , the slope of the perfectly elastic supply curve .