Question 1

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:

Accepted Answer

A)  decrease by 15%. 
B)  increase by 15%. 
C)  decrease by 1.5%. 
D)  increase by 1.5%. 
A)  decrease by 15%. 
B)  increase by 15%. 
C)  decrease by 1.5%. 
D)  increase by 1.5%.

Question 2

The income elasticity of demand measures:

Accepted Answer

A)  how much the quantity demanded changes in response to a price change. 
B)  how much a consumer can buy at given income levels. 
C)  how much consumer purchasing power is affected when prices change. 
D)  how the quantity demanded of a good changes in response to changes in income. 
A)  how much the quantity demanded changes in response to a price change. 
B)  how much a consumer can buy at given income levels. 
C)  how much consumer purchasing power is affected when prices change. 
D)  how the quantity demanded of a good changes in response to changes in income.

Question 3

If two goods are complements, their cross-price elasticity of demand is:

Accepted Answer

A)  less than 0. 
B)  equal to 0. 
C)  positive but almost equal to 0. 
D)  greater than 0. 
A)  less than 0. 
B)  equal to 0. 
C)  positive but almost equal to 0. 
D)  greater than 0.

Question 4

Goods A and B have a positive cross-price elasticity of demand. This means goods A and B are:

Accepted Answer

A)  normal. 
B)  substitutes. 
C)  complements. 
D)  inferior. 
A)  normal. 
B)  substitutes. 
C)  complements. 
D)  inferior.

Question 5

The price elasticity of supply for a good is 3 if a _____ in price leads to a 3% decrease in the quantity supplied.

Accepted Answer

A)  1% increase 
B)  1% decrease 
C)  9% decrease 
D)  9% increase 
A)  1% increase 
B)  1% decrease 
C)  9% decrease 
D)  9% increase

Question 6

Use the following to answer questions:
Figure: The Linear Demand Curve  
-(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _____, and you notice that your price elasticity of demand is _____.

Accepted Answer

A)  increase; elastic 
B)  decrease; elastic 
C)  increase; inelastic 
D)  decrease; inelastic 
A)  increase; elastic 
B)  decrease; elastic 
C)  increase; inelastic 
D)  decrease; inelastic

Question 7

If a 20% price increase generates a 20% decrease in quantity demanded, then this is _____ response.

Accepted Answer

A)  an inelastic 
B)  an elastic 
C)  a unit-elastic 
D)  a perfectly elastic 
A)  an inelastic 
B)  an elastic 
C)  a unit-elastic 
D)  a perfectly elastic

Question 8

It is very difficult for Julia to find inexpensive inputs for her business. Because of this, we predict that Julia's price elasticity of supply is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit-elastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  inelastic. 
C)  unit-elastic. 
D)  perfectly elastic.

Question 9

Supply curves tend to be more _____ the more time producers have to adjust to price changes.

Accepted Answer

A)  price-inelastic 
B)  price-elastic 
C)  steeply sloped 
D)  inflexible 
A)  price-inelastic 
B)  price-elastic 
C)  steeply sloped 
D)  inflexible

Question 10

A perfectly price-inelastic demand curve is:

Accepted Answer

A)  horizontal. 
B)  downward-sloping. 
C)  upward-sloping. 
D)  vertical. 
A)  horizontal. 
B)  downward-sloping. 
C)  upward-sloping. 
D)  vertical.

Question 11

A perfectly elastic supply curve is:

Accepted Answer

A)  horizontal. 
B)  downward-sloping. 
C)  upward-sloping. 
D)  vertical. 
A)  horizontal. 
B)  downward-sloping. 
C)  upward-sloping. 
D)  vertical.

Question 12

If two goods are complementary, we can assume that the cross-price elasticity of demand for these goods is:

Accepted Answer

A)  between 0 and 1. 
B)  equal to 0. 
C)  greater than 1. 
D)  less than 0. 
A)  between 0 and 1. 
B)  equal to 0. 
C)  greater than 1. 
D)  less than 0.

Question 13

If the income elasticity of demand for a good is positive, the good is said to be:

Accepted Answer

A)  inferior. 
B)  a substitute. 
C)  normal. 
D)  positive. 
A)  inferior. 
B)  a substitute. 
C)  normal. 
D)  positive.

Question 14

The price elasticity of demand for skiing lessons in New Hampshire is over 1. This means that the demand is _____ in New Hampshire.

Accepted Answer

A)  price elastic 
B)  price inelastic 
C)  price unit-elastic. 
D)  perfectly price elastic 
A)  price elastic 
B)  price inelastic 
C)  price unit-elastic. 
D)  perfectly price elastic

Question 15

For a good to be considered normal, the _____ elasticity of demand must be _____.

Accepted Answer

A)  income; between 1 and 0 
B)  cross-price; less than 0 
C)  cross-price; equal to 0 
D)  income; greater than 0 
A)  income; between 1 and 0 
B)  cross-price; less than 0 
C)  cross-price; equal to 0 
D)  income; greater than 0

Question 16

Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day. Demand for gasoline in Orlando is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  price unit-elastic. 
D)  perfectly price inelastic. 
A)  price elastic. 
B)  price inelastic. 
C)  price unit-elastic. 
D)  perfectly price inelastic.

Question 17

Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%:

Accepted Answer

A)  Burger King will sell 10% more burgers. 
B)  Burger King will sell 8% more burgers. 
C)  Burger King will sell 8% fewer burgers. 
D)  We cannot tell what will happen to Burger King, but McDonald's will sell 8% fewer burgers. 
A)  Burger King will sell 10% more burgers. 
B)  Burger King will sell 8% more burgers. 
C)  Burger King will sell 8% fewer burgers. 
D)  We cannot tell what will happen to Burger King, but McDonald's will sell 8% fewer burgers.

Question 18

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are:

Accepted Answer

A)  unrelated goods. 
B)  complementary goods. 
C)  inferior goods. 
D)  substitute goods. 
A)  unrelated goods. 
B)  complementary goods. 
C)  inferior goods. 
D)  substitute goods.

Question 19

The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15%, all other things unchanged, total revenue will:

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  The information is insufficient to answer the question. 
A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  The information is insufficient to answer the question.

Question 20

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is _____, and if the price is $0.95, total revenue is _____.

Accepted Answer

A)  $209; $204.25 
B)  $209; $236.50 
C)  $236.50; $209 
D)  $180.50; $209 
A)  $209; $204.25 
B)  $209; $236.50 
C)  $236.50; $209 
D)  $180.50; $209

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:

The income elasticity of demand measures:

If two goods are complements, their cross-price elasticity of demand is:

Goods A and B have a positive cross-price elasticity of demand. This means goods A and B are:

The price elasticity of supply for a good is 3 if a _____ in price leads to a 3% decrease in the quantity supplied.

Use the following to answer questions: Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _, and you notice that your price elasticity of demand is _.

If a 20% price increase generates a 20% decrease in quantity demanded, then this is _____ response.

It is very difficult for Julia to find inexpensive inputs for her business. Because of this, we predict that Julia's price elasticity of supply is:

Supply curves tend to be more _____ the more time producers have to adjust to price changes.

A perfectly price-inelastic demand curve is:

A perfectly elastic supply curve is:

If two goods are complementary, we can assume that the cross-price elasticity of demand for these goods is:

If the income elasticity of demand for a good is positive, the good is said to be:

The price elasticity of demand for skiing lessons in New Hampshire is over 1. This means that the demand is _____ in New Hampshire.

For a good to be considered normal, the _ elasticity of demand must be _.

Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day. Demand for gasoline in Orlando is:

Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%:

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are:

The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15%, all other things unchanged, total revenue will:

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is _, and if the price is $0.95, total revenue is _.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 6: Elasticity

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:

The income elasticity of demand measures:

If two goods are complements, their cross-price elasticity of demand is:

Goods A and B have a positive cross-price elasticity of demand. This means goods A and B are:

The price elasticity of supply for a good is 3 if a _____ in price leads to a 3% decrease in the quantity supplied.

Use the following to answer questions: Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _____, and you notice that your price elasticity of demand is _____.

If a 20% price increase generates a 20% decrease in quantity demanded, then this is _____ response.

It is very difficult for Julia to find inexpensive inputs for her business. Because of this, we predict that Julia's price elasticity of supply is:

Supply curves tend to be more _____ the more time producers have to adjust to price changes.

A perfectly price-inelastic demand curve is:

A perfectly elastic supply curve is:

If two goods are complementary, we can assume that the cross-price elasticity of demand for these goods is:

If the income elasticity of demand for a good is positive, the good is said to be:

The price elasticity of demand for skiing lessons in New Hampshire is over 1. This means that the demand is _____ in New Hampshire.

For a good to be considered normal, the _____ elasticity of demand must be _____.

Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day. Demand for gasoline in Orlando is:

Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%:

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are:

The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15%, all other things unchanged, total revenue will:

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is _____, and if the price is $0.95, total revenue is _____.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Use the following to answer questions: Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _, and you notice that your price elasticity of demand is _.

For a good to be considered normal, the _ elasticity of demand must be _.

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is _, and if the price is $0.95, total revenue is _.