Question 1

Along a perfectly elastic demand curve,

Accepted Answer

A)  the slope is always zero. 
B)  the price elasticity of demand is 1. 
C)  consumer purchases will not respond at all to a change in price. 
D)  All of the above are true. 
A)  the slope is always zero. 
B)  the price elasticity of demand is 1. 
C)  consumer purchases will not respond at all to a change in price. 
D)  All of the above are true.

Question 2

At $6 per steak, consumers are willing to buy two steaks.At a price of $2, consumers are willing to buy six steaks.The elasticity of the market demand curve between P = $6 and P = $2 (dropping all minus signs) is

Accepted Answer

A)  0.33. 
B)  1. 
C)  2. 
D)  4. 
A)  0.33. 
B)  1. 
C)  2. 
D)  4.

Question 3

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

Accepted Answer

A)  2, elastic 
B)  2, inelastic 
C)  0.5, elastic 
D)  0.5, inelastic 
A)  2, elastic 
B)  2, inelastic 
C)  0.5, elastic 
D)  0.5, inelastic

Question 4

If the cross elasticity of demand for potato chips and pretzels equals 1.5,

Accepted Answer

A)  potato chips and pretzels must both be luxury goods. 
B)  either potato chips or pretzels must be a luxury good, and both may be luxury goods. 
C)  potato chips and pretzels must be substitutes. 
D)  potato chips and pretzels must be complements. 
A)  potato chips and pretzels must both be luxury goods. 
B)  either potato chips or pretzels must be a luxury good, and both may be luxury goods. 
C)  potato chips and pretzels must be substitutes. 
D)  potato chips and pretzels must be complements.

Question 5

The elasticity of supply is calculated by

Accepted Answer

A)  determining the slope of the supply curve. 
B)  dividing the absolute change in quantity supplied by the absolute change in price. 
C)  dividing the percentage change in quantity supplied by the percentage change in price. 
D)  dividing the percentage change in price by the percentage change in quantity demanded. 
A)  determining the slope of the supply curve. 
B)  dividing the absolute change in quantity supplied by the absolute change in price. 
C)  dividing the percentage change in quantity supplied by the percentage change in price. 
D)  dividing the percentage change in price by the percentage change in quantity demanded.

Question 6

Cross elasticity of demand for

Accepted Answer

A)  substitutes will normally be positive. 
B)  complements will normally be positive. 
C)  substitutes will normally be negative. 
D)  complements will normally be infinite. 
A)  substitutes will normally be positive. 
B)  complements will normally be positive. 
C)  substitutes will normally be negative. 
D)  complements will normally be infinite.

Question 7

A good will tend to be more price elastic if it

Accepted Answer

A)  is a luxury good. 
B)  has no close substitutes. 
C)  is a small part of the household budget. 
D)  is a necessity. 
A)  is a luxury good. 
B)  has no close substitutes. 
C)  is a small part of the household budget. 
D)  is a necessity.

Question 8

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

Accepted Answer

A) True 
 B)False

Question 9

What are the main determinants of demand elasticity? Explain their importance.

Accepted Answer

First is the nature of the good.Necessit

Exam 6: Demand and Elasticity

Along a perfectly elastic demand curve,

At $6 per steak, consumers are willing to buy two steaks.At a price of $2, consumers are willing to buy six steaks.The elasticity of the market demand curve between P = $6 and P = $2 (dropping all minus signs) is

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

If the cross elasticity of demand for potato chips and pretzels equals 1.5,

The elasticity of supply is calculated by

Cross elasticity of demand for

A good will tend to be more price elastic if it

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

What are the main determinants of demand elasticity? Explain their importance.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is , indicating the demand is .