Question 1

If your income increases and your consumption of a good increases, then, for you, that good is considered:
A.a negative good.
B.a positive good.
C.an inferior good.
D.a normal good.

Accepted Answer

The answer of If your income increases and your consumption...

Question 2

A group of dairy farmers is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, then by how much should farmers reduce their milk production to obtain the 10% increase?

Accepted Answer

A) 10% 
B) 7.5% 
C) 15% 
D) 13% 
A) 10% 
B) 7.5% 
C) 15% 
D) 13%

Question 3

In general, we would predict demand for Gala apples to be:
A.price-elastic.
B.price-inelastic.
C.perfectly price-elastic.
D.perfectly price-inelastic.

Accepted Answer

The answer of In general, we would predict demand for...

Question 4

If the income elasticity of demand for a good is positive, the good is said to be:
A.an inferior good.
B.a substitute good.
C.a normal good.
D.a positive good.

Accepted Answer

The answer of If the income elasticity of demand for...

Question 5

Suppose the cross-price elasticity between two goods is equal to zero.What does this tell you about these two goods?

Accepted Answer

Answer
It tells us that consumers don't

Question 6

What would happen in the market for canned pinto beans if individuals' incomes increased?
A.The income elasticity of demand would be positive if beans are a normal good.
B.The income elasticity of demand would be positive if beans are an inferior good.
C.The cross-price elasticity between beans and other goods would be positive.
D.The cross-price elasticity between beans and other goods would be negative.

Accepted Answer

The income elasticit

Question 7

Since for most people, eating in restaurants is a luxury and eating at home is a necessity, the price elasticity of demand for food eaten at home is less than the price elasticity of demand for eating in restaurants.

Accepted Answer

A) True 
 B)False

Question 8

(Table: Johnson's Income and Expenditures) Look again at the table Johnson's Income and
Expenditures.For Johnson, magazines are:
A.a negative good.
B.an inferior good.
C.a normal good.
D.a neutral good.

Accepted Answer

The answer of (Table: Johnson's Income and Expenditures) Look again...

Question 9

Which of the following is true about the price elasticity of demand?
A.When demand is perfectly inelastic, a rise in the price leads to a decrease in total revenue.
B.When demand is perfectly elastic, a rise in the price leads to an increase in total revenue.
C.When demand is inelastic, a rise in the price leads to an increase in total revenue.
D.When demand is elastic, a decrease in the price leads to a decrease in total revenue.

Accepted Answer

When demand is inela

Question 10

Gas prices recently increased by 25%.In response, purchases of gasoline decreased by 5%.Based on this data, the price elasticity of demand for gas is:

Accepted Answer

A) 5. 
B) 2. 
C) 0.2. 
D) 0.5. 
A) 5. 
B) 2. 
C) 0.2. 
D) 0.5.

Question 11

Figure: The Demand for Shirts
   (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts.Using the midpoint method, the price elasticity of demand for the segment BC is: 
A.less than the price elasticity of demand for the segment AB.zero.
B.greater than 3.
C.less than the price elasticity of demand for the segment CD.

Accepted Answer

less than the price

Question 12

Which of the following statements is true?
A.If the price elasticity of supply is less than 1, then the supply is price-elastic.
B.If the price elasticity of supply is less than 1, then the supply is price-inelastic.
C.If the price elasticity of supply is zero, then price is unit-elastic.
D.If the price elasticity of supply is less than 1, then the supply is very responsive to price changes.

Accepted Answer

If the price elastic

Question 13

Figure: The Demand for Shirts   (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts.The price elasticity of demand, using the midpoint method, for the segment FG is:

Accepted Answer

A) 0. 
B) 0.09. 
C) 0.5. 
D) greater than 1. 
A) 0. 
B) 0.09. 
C) 0.5. 
D) greater than 1.

Question 14

The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair.Using the midpoint formula, what do they think is the price elasticity of demand?

Accepted Answer

A) 2.5. 
B) 1.4. 
C) 0.7. 
D) 0.5. 
A) 2.5. 
B) 1.4. 
C) 0.7. 
D) 0.5.

Question 15

Suppose you manage a convenience mart and are in charge of ordering products but do not set the price.The home office provides the prices.In your area, the income elasticity of demand for peanut butter is -0.5.Due to local factory closings, you expect local incomes to decrease by 20% on average in the next month.As a result, you should stock:
A.20% more peanut butter on the shelves.
B.5% more peanut butter on the shelves.
C.10% more peanut butter on the shelves.
D.10% less peanut butter on the shelves.

Accepted Answer

10% more p

Question 16

Figure: The Demand for Notebook Computers
   (Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers.The change in total revenue resulting from a change in price from P to T suggests that demand is: 
A.inelastic.
B.price-elastic.
C.price-inelastic.
D.price unit-elastic.

Accepted Answer

The answer of Figure: The Demand for Notebook Computers
 ...

Question 17

Table: Price Elasticity
(Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $1.50 and $1.25?

Accepted Answer

A) 1.00 
B) 1.22 
C) 1.50 
D) 1.75 
A) 1.00 
B) 1.22 
C) 1.50 
D) 1.75

Question 18

The city government is losing millions of dollars on the mass transit system (buses and subways).The government proposes to increase the fare of a ticket by 20% to raise revenue and has asked your advice.You know that the price elasticity of demand for mass transit in the city is approximately equal to 0.75.What do you think of the proposal to increase the fare to raise revenue for the city? Be as specific as possible.

Accepted Answer

Answer
Because the elasticity of demand

Question 19

Figure: The Demand for Shirts     (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment BC, using the midpoint method, is:

Accepted Answer

A) greater than 3.33. 
B) 3.33. 
C) 3. 
D) 0.33. 
A) greater than 3.33. 
B) 3.33. 
C) 3. 
D) 0.33.

Question 20

The demand for strawberry ice cream tends to be relatively price-elastic because:
A.for most people there are many close substitutes for strawberry ice cream.
B.it is a necessity for most people.
C.it has to be consumed very quickly.
D.it costs so little.

Accepted Answer

for most people ther

If your income increases and your consumption of a good increases, then, for you, that good is considered: A.a negative good. B.a positive good. C.an inferior good. D.a normal good.

A group of dairy farmers is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, then by how much should farmers reduce their milk production to obtain the 10% increase?

In general, we would predict demand for Gala apples to be: A.price-elastic. B.price-inelastic. C.perfectly price-elastic. D.perfectly price-inelastic.

If the income elasticity of demand for a good is positive, the good is said to be: A.an inferior good. B.a substitute good. C.a normal good. D.a positive good.

Suppose the cross-price elasticity between two goods is equal to zero.What does this tell you about these two goods?

Since for most people, eating in restaurants is a luxury and eating at home is a necessity, the price elasticity of demand for food eaten at home is less than the price elasticity of demand for eating in restaurants.

(Table: Johnson's Income and Expenditures) Look again at the table Johnson's Income and Expenditures.For Johnson, magazines are: A.a negative good. B.an inferior good. C.a normal good. D.a neutral good.

Gas prices recently increased by 25%.In response, purchases of gasoline decreased by 5%.Based on this data, the price elasticity of demand for gas is:

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts.The price elasticity of demand, using the midpoint method, for the segment FG is:

The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair.Using the midpoint formula, what do they think is the price elasticity of demand?

Table: Price Elasticity (Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $1.50 and $1.25?

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment BC, using the midpoint method, is:

The demand for strawberry ice cream tends to be relatively price-elastic because: A.for most people there are many close substitutes for strawberry ice cream. B.it is a necessity for most people. C.it has to be consumed very quickly. D.it costs so little.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 6: Elasticity

If your income increases and your consumption of a good increases, then, for you, that good is considered: A.a negative good. B.a positive good. C.an inferior good. D.a normal good.

A group of dairy farmers is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, then by how much should farmers reduce their milk production to obtain the 10% increase?

In general, we would predict demand for Gala apples to be: A.price-elastic. B.price-inelastic. C.perfectly price-elastic. D.perfectly price-inelastic.

If the income elasticity of demand for a good is positive, the good is said to be: A.an inferior good. B.a substitute good. C.a normal good. D.a positive good.

Suppose the cross-price elasticity between two goods is equal to zero.What does this tell you about these two goods?

Since for most people, eating in restaurants is a luxury and eating at home is a necessity, the price elasticity of demand for food eaten at home is less than the price elasticity of demand for eating in restaurants.

(Table: Johnson's Income and Expenditures) Look again at the table Johnson's Income and Expenditures.For Johnson, magazines are: A.a negative good. B.an inferior good. C.a normal good. D.a neutral good.

Gas prices recently increased by 25%.In response, purchases of gasoline decreased by 5%.Based on this data, the price elasticity of demand for gas is:

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts.The price elasticity of demand, using the midpoint method, for the segment FG is:

The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair.Using the midpoint formula, what do they think is the price elasticity of demand?

Table: Price Elasticity (Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $1.50 and $1.25?

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment BC, using the midpoint method, is:

The demand for strawberry ice cream tends to be relatively price-elastic because: A.for most people there are many close substitutes for strawberry ice cream. B.it is a necessity for most people. C.it has to be consumed very quickly. D.it costs so little.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters