Exam 6: Elasticity

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 costs so little. C.it has to be consumed very quickly. D.for most people there are many close substitutes for strawberry ice cream and because it costs so little.

Figure: The Demand Curve for Oil (Figure: Demand Curve for Oil) Look at the figure The Demand Curve for Oil.The price elasticity of demand between $20 and $21, using the midpoint method, is approximately:

Suppose at a price of $10 the quantity demanded is 100.When the price falls to $8, the quantity demanded increases to 130.The price elasticity of demand between the prices of $10 and $8, using the midpoint method, is approximately:

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt.The price elasticity of demand (using the midpoint method) is: A.greater than zero but less than 1. B.equal to 1. C.greater than 1 but less than 3. D.greater than 3.

Suppose the cross-price elasticity between two goods is 1.5.If the price of one good increases by 10%, then the quantity demanded of the other good will: A.decrease by 15%. B.increase by 15%. C.decrease by 1.5%. D.increase by 1.5%.

The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2.This implies that: A.natural gas and electricity are both normal goods. B.electricity and natural gas are complements. C.electricity and natural gas are substitutes. D.one of the two goods is inferior and the other is normal, but we need additional information to determine which of them is normal.

Suppose the price of real estate increases by 37.11% in Oakland next year.If the quantity of new homes supplied does not change, this means that the price elasticity of will be perfectly in Oakland next year. A.demand; elastic B.supply; inelastic C.demand; inelastic D.supply; elastic

Figure: The Linear Demand Curve (Figure: The Linear Demand Curve) Look again at the figure The Linear Demand Curve.If you currently sell scarves at $7 and you increase the price to $8, your total revenue will , and you notice that your price elasticity of demand is _. A.increase; elastic B.decrease; elastic C.increase; inelastic D.decrease; inelastic

A price floor will cause a larger surplus when demand is ________ and supply is _. A.elastic; inelastic B.inelastic; inelastic C.elastic; elastic D.perfectly inelastic; elastic

Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%.For Raina, pencils and pens are , and the cross-price elasticity of demand is ________. A.complements; 1/2 B.substitutes; -1/2 C.complements; 2 D.substitutes; 2

Each month Jessica buys exactly 15 Big Macs regardless of the price.Jessica's price elasticity of demand for Big Macs is:

If a good is a necessity with few substitutes, then demand will tend to:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

Demand for vegetables at a small farmers' market is steady, but the supply of vegetables has decreased because of a drought.This is good news for farmers if demand is: A.inelastic and the price effect outweighs the output effect. B.elastic and the price effect outweighs the output effect. C.inelastic and the output effect outweighs the price effect. D.elastic and the output effect outweighs the price effect.

The price elasticity of supply is computed as the percentage change in the: A.quantity supplied divided by the percentage change in the quantity demanded. B.quantity supplied divided by the percentage change in the price. C.price divided by the percentage change in the quantity supplied. D.quantity supplied divided by the percentage change in consumer income.

If the price elasticity of demand between two points on a demand curve is 0.75, then the demand between those two points is: A.price unit-elastic. B.price-inelastic. C.price-elastic. D.unknown.

Suppose that an increase in the price of a good leads to an increase in total revenue.Ignoring other factors (like supply), at its current price the good must be: A.price-inelastic. B.price-elastic. C.perfectly price-elastic. D.inferior.

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look at the figure.If the price is below , demand is inelastic. A.$10 B.$20 C.$30 D.$40

The price elasticity of demand measures the: A.responsiveness of the quantity demanded to a change in the price. B.responsiveness of the price to a change in the quantity demanded. C.extent to which prices are flexible and respond to market forces. D.responsiveness of demand when the price is held constant and demand increases or decreases.

The ratio of the percentage change in the quantity demanded to the percentage change in price is the: A.price elasticity of demand. B.quantity elasticity of demand. C.income elasticity of demand. D.cross-price elasticity of demand.