Question 1

Demand is elastic when a price ________ results in total revenue ________.

Accepted Answer

A)  rise, decreasing 
B)  fall, decreasing 
C)  rise, increasing 
D)  fall; remaining constant 
A)  rise, decreasing 
B)  fall, decreasing 
C)  rise, increasing 
D)  fall; remaining constant A

Question 2

When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use the midpoint method.)

Accepted Answer

The price elasticity of demand = (percentage change in the quantity demanded) ÷ (percentage change in the price). Using the midpoint method to calculate the percentages, the percentage change in the quantity demanded = (700 - 500) ÷ (600) × 100 = 33.3 percent and the percentage change in the price is ($10 - $14) ÷ ($12) = -33.3 percent. We ignore the negative sign so that the price elasticity of demand equals (33.3 percent) ÷ (33.3 percent), or 1.00.

Question 3

If the price of milk increased by 5 percent because of an increase in the demand for milk, and the quantity of milk supplied increased by 7 percent

Accepted Answer

A)  the supply curve of milk has shifted rightward. 
B)  the price elasticity of supply of milk is greater than one. 
C)  milk is more of a luxury than a necessity. 
D)  milk is more of a necessity than a luxury. 
A)  the supply curve of milk has shifted rightward. 
B)  the price elasticity of supply of milk is greater than one. 
C)  milk is more of a luxury than a necessity. 
D)  milk is more of a necessity than a luxury. B

Question 4

When Monica's Catering lowered the price of catered meals from $60 per person to $20 per person, the quantity demanded doubled from 500 meals to 1,000 meals. You can conclude that the demand for Monica's catered meals over the price range of $20 to $60 is

Accepted Answer

A)  upward sloping. 
B)  unit elastic. 
C)  elastic. 
D)  inelastic. 
A)  upward sloping. 
B)  unit elastic. 
C)  elastic. 
D)  inelastic.

Question 5

If your demand for gasoline is inelastic, when the price of gasoline falls, which of the following occurs?

Accepted Answer

A)  Your demand curve for gasoline will shift leftward. 
B)  Your demand curve for gasoline will shift rightward. 
C)  Your total expenditure on gasoline will increase. 
D)  Your total expenditure on gasoline will decrease. 
A)  Your demand curve for gasoline will shift leftward. 
B)  Your demand curve for gasoline will shift rightward. 
C)  Your total expenditure on gasoline will increase. 
D)  Your total expenditure on gasoline will decrease.

Question 6

Perfectly elastic demand is represented by a demand curve that

Accepted Answer

A)  is vertical. 
B)  is horizontal. 
C)  has a 45° slope. 
D)  is a rectangular hyperbola. 
A)  is vertical. 
B)  is horizontal. 
C)  has a 45° slope. 
D)  is a rectangular hyperbola.

Question 7

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Suppose the price elasticity of demand for beef is elastic. Consumption would then

Accepted Answer

A)  decrease by greater than 3 percent. 
B)  increase by greater than 3 percent. 
C)  decrease by less than 3 percent. 
D)  increase by less than 3 percent. 
A)  decrease by greater than 3 percent. 
B)  increase by greater than 3 percent. 
C)  decrease by less than 3 percent. 
D)  increase by less than 3 percent.

Question 8

When the demand for a good is perfectly elastic

Accepted Answer

A)  total revenue is as large as possible. 
B)  the demand curve for the good is vertical. 
C)  the price elasticity of demand is infinite. 
D)  the price elasticity of demand is zero. 
A)  total revenue is as large as possible. 
B)  the demand curve for the good is vertical. 
C)  the price elasticity of demand is infinite. 
D)  the price elasticity of demand is zero.

Question 9

For electricity, natural gas, or other forms of energy, it is very likely that the price elasticity of demand

Accepted Answer

A)  is zero. 
B)  is infinite. 
C)  will decrease in magnitude as more time passes after a price change. 
D)  will increase in magnitude as more time passes after a price change. 
A)  is zero. 
B)  is infinite. 
C)  will decrease in magnitude as more time passes after a price change. 
D)  will increase in magnitude as more time passes after a price change.

Question 10

"The fewer the number of substitutes for a good, the more elastic the demand for that good." Is the previous statement true or false?

Accepted Answer

The statement is false. The greater the

Question 11

When we calculate the price elasticity of demand, we use percentages of the average price and the average quantity in order to get the same value for the elasticity regardless of whether the price falls or rises.

Accepted Answer

A) True 
 B)False

Question 12

A product is likely to have a price elasticity of demand that exceeds 1 when

Accepted Answer

A)  its price falls. 
B)  the percentage of income spent on it decreases. 
C)  it is a necessity. 
D)  it has close substitutes. 
A)  its price falls. 
B)  the percentage of income spent on it decreases. 
C)  it is a necessity. 
D)  it has close substitutes.

Question 13

If the cross elasticity of demand between coffee and tea is positive, an increase in the price of tea will shift the demand curve for

Accepted Answer

A)  tea rightward. 
B)  tea leftward. 
C)  coffee rightward. 
D)  coffee leftward. 
A)  tea rightward. 
B)  tea leftward. 
C)  coffee rightward. 
D)  coffee leftward.

Question 14

The cross elasticity of demand for pizza with respect to the price of a soda is

Accepted Answer

A)  positive because the goods are complements. 
B)  negative because the goods are complements. 
C)  positive because the goods are substitutes. 
D)  negative because the goods are substitutes. 
A)  positive because the goods are complements. 
B)  negative because the goods are complements. 
C)  positive because the goods are substitutes. 
D)  negative because the goods are substitutes.

Question 15

Jenny's weekly income increases from $500 to $650. As a result, she goes out for dinner one day a week instead of one day every other week. What is Jenny's income elasticity of demand for restaurant dinners?

Accepted Answer

The income elasticity of demand = (perce

Question 16

The amount of time elapsed since a price change impacts the elasticity of demand because as more time passes

Accepted Answer

A)  people can find more substitutes, and so the elasticity of demand decreases. 
B)  people can find more substitutes, and so the elasticity of demand increases. 
C)  people's incomes will increase, and so the elasticity of demand decreases. 
D)  the good's price will have a chance to return to its previous level. 
A)  people can find more substitutes, and so the elasticity of demand decreases. 
B)  people can find more substitutes, and so the elasticity of demand increases. 
C)  people's incomes will increase, and so the elasticity of demand decreases. 
D)  the good's price will have a chance to return to its previous level.

Question 17

If the price elasticity of demand for clothing is 0.64, this implies that

Accepted Answer

A)  a 6.4 percent increase in price the price of clothing leads to a 10 percent decrease in the quantity demanded. 
B)  a 10 percent increase in the price of clothing leads to a 6.4 percent decrease in the quantity demanded. 
C)  if there is an increase in the price of clothing the total expenditures on clothing decreases. 
D)  Both answers A and C are correct. 
A)  a 6.4 percent increase in price the price of clothing leads to a 10 percent decrease in the quantity demanded. 
B)  a 10 percent increase in the price of clothing leads to a 6.4 percent decrease in the quantity demanded. 
C)  if there is an increase in the price of clothing the total expenditures on clothing decreases. 
D)  Both answers A and C are correct.

Question 18

The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

Accepted Answer

A)  price of furniture will increase the quantity of furniture demanded by 1.3 percent. 
B)  price of furniture will decrease the quantity of furniture demanded by 1.3 percent. 
C)  quantity of furniture demanded will decrease the price of furniture by 1.3 percent. 
D)  quantity of furniture demanded will increase the price of furniture by 1.3 percent. 
A)  price of furniture will increase the quantity of furniture demanded by 1.3 percent. 
B)  price of furniture will decrease the quantity of furniture demanded by 1.3 percent. 
C)  quantity of furniture demanded will decrease the price of furniture by 1.3 percent. 
D)  quantity of furniture demanded will increase the price of furniture by 1.3 percent.

Question 19

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

Accepted Answer

A)  "A price cut won't help me. It won't increase my sales, and I'll just get less money for each unit." 
B)  "I don't think a price cut will help my bottom line any. Sure, I'll sell a bit more, but I'll more than lose because the price will be lower." 
C)  "My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming." 
D)  "The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!" 
A)  "A price cut won't help me. It won't increase my sales, and I'll just get less money for each unit." 
B)  "I don't think a price cut will help my bottom line any. Sure, I'll sell a bit more, but I'll more than lose because the price will be lower." 
C)  "My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming." 
D)  "The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!"

Question 20

To say that turnips are inferior goods means that the income elasticity

Accepted Answer

A)  is definitely greater than 1. 
B)  is definitely between 0 and 1. 
C)  is positive but could be greater than or less than (or equal to) 1. 
D)  is negative. 
A)  is definitely greater than 1. 
B)  is definitely between 0 and 1. 
C)  is positive but could be greater than or less than (or equal to) 1. 
D)  is negative.

Demand is elastic when a price results in total revenue .

When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use the midpoint method.)

If the price of milk increased by 5 percent because of an increase in the demand for milk, and the quantity of milk supplied increased by 7 percent

When Monica's Catering lowered the price of catered meals from $60 per person to $20 per person, the quantity demanded doubled from 500 meals to 1,000 meals. You can conclude that the demand for Monica's catered meals over the price range of $20 to $60 is

If your demand for gasoline is inelastic, when the price of gasoline falls, which of the following occurs?

Perfectly elastic demand is represented by a demand curve that

When the demand for a good is perfectly elastic

For electricity, natural gas, or other forms of energy, it is very likely that the price elasticity of demand

"The fewer the number of substitutes for a good, the more elastic the demand for that good." Is the previous statement true or false?

When we calculate the price elasticity of demand, we use percentages of the average price and the average quantity in order to get the same value for the elasticity regardless of whether the price falls or rises.

A product is likely to have a price elasticity of demand that exceeds 1 when

If the cross elasticity of demand between coffee and tea is positive, an increase in the price of tea will shift the demand curve for

The cross elasticity of demand for pizza with respect to the price of a soda is

Jenny's weekly income increases from $500 to $650. As a result, she goes out for dinner one day a week instead of one day every other week. What is Jenny's income elasticity of demand for restaurant dinners?

The amount of time elapsed since a price change impacts the elasticity of demand because as more time passes

If the price elasticity of demand for clothing is 0.64, this implies that

The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

To say that turnips are inferior goods means that the income elasticity

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 4: Elasticity

Demand is elastic when a price ________ results in total revenue ________.

When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use the midpoint method.)

If the price of milk increased by 5 percent because of an increase in the demand for milk, and the quantity of milk supplied increased by 7 percent

When Monica's Catering lowered the price of catered meals from $60 per person to $20 per person, the quantity demanded doubled from 500 meals to 1,000 meals. You can conclude that the demand for Monica's catered meals over the price range of $20 to $60 is

If your demand for gasoline is inelastic, when the price of gasoline falls, which of the following occurs?

Perfectly elastic demand is represented by a demand curve that

When the demand for a good is perfectly elastic

For electricity, natural gas, or other forms of energy, it is very likely that the price elasticity of demand

"The fewer the number of substitutes for a good, the more elastic the demand for that good." Is the previous statement true or false?

When we calculate the price elasticity of demand, we use percentages of the average price and the average quantity in order to get the same value for the elasticity regardless of whether the price falls or rises.

A product is likely to have a price elasticity of demand that exceeds 1 when

If the cross elasticity of demand between coffee and tea is positive, an increase in the price of tea will shift the demand curve for

The cross elasticity of demand for pizza with respect to the price of a soda is

Jenny's weekly income increases from $500 to $650. As a result, she goes out for dinner one day a week instead of one day every other week. What is Jenny's income elasticity of demand for restaurant dinners?

The amount of time elapsed since a price change impacts the elasticity of demand because as more time passes

If the price elasticity of demand for clothing is 0.64, this implies that

The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

To say that turnips are inferior goods means that the income elasticity

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Demand is elastic when a price results in total revenue .