Question 1

If the price elasticity of supply equals zero, this implies that

Accepted Answer

A)  suppliers can easily change quantity supplied when price changes. 
B)  the supply curve is vertical. 
C)  the percentage change in price of the good supplied is zero. 
D)  the percentage change in quantity supplied equals the percentage change in price. 
A)  suppliers can easily change quantity supplied when price changes. 
B)  the supply curve is vertical. 
C)  the percentage change in price of the good supplied is zero. 
D)  the percentage change in quantity supplied equals the percentage change in price.

Question 2

If the cross-price elasticity between two goods is negative, the two goods are likely to be

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  necessities. 
D)  luxuries. 
A)  substitutes. 
B)  complements. 
C)  necessities. 
D)  luxuries.

Question 3

If the price elasticity of demand within the price range from R10 to R12.50 per kilogram for carrots is 0.79 and for radishes is 1.6, then within that price range

Accepted Answer

A)  demand for carrots is more price elastic than that for radishes. 
B)  demand for radishes is more price elastic than that for carrots. 
C)  carrots and radishes must be substitute goods. 
D)  carrots and radishes must be complementary goods. 
A)  demand for carrots is more price elastic than that for radishes. 
B)  demand for radishes is more price elastic than that for carrots. 
C)  carrots and radishes must be substitute goods. 
D)  carrots and radishes must be complementary goods.

Question 4

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

Accepted Answer

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

Question 5

The price elasticity of demand measures the

Accepted Answer

A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income. 
A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income.

Question 6

If the income elasticity of demand for a good is negative, it must be

Accepted Answer

A)  an elastic good. 
B)  an inferior good. 
C)  a normal good. 
D)  a luxury good. 
A)  an elastic good. 
B)  an inferior good. 
C)  a normal good. 
D)  a luxury good.

Question 7

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 8

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favour of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers. 
A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favour of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers.

Question 9

If a demand curve is linear, the price elasticity of demand is constant along it.

Accepted Answer

A) True 
 B)False

Question 10

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Accepted Answer

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

Question 11

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C)  Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct. 
A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C)  Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct.

Question 12

The demand for which of the following is likely to be the most price inelastic?

Accepted Answer

A)  Transportation 
B)  Uber rides 
C)  Bus tickets 
D)  Airline tickets 
A)  Transportation 
B)  Uber rides 
C)  Bus tickets 
D)  Airline tickets

Question 13

A government seeking to raise revenue would be most likely to tax a good with a

Accepted Answer

A)  high income elasticity of demand. 
B)  low cross-price demand elasticity. 
C)  high price elasticity of demand. 
D)  low price elasticity of demand. 
A)  high income elasticity of demand. 
B)  low cross-price demand elasticity. 
C)  high price elasticity of demand. 
D)  low price elasticity of demand.

Question 14

Use the graph shown to answer the following questions. Put the correct letter(s) in the blank.   
a. The elastic section of the graph is represented by section from _______.
b. The inelastic section of the graph is represented by section from _______.
c. The unit elastic section of the graph is represented by section _______.
d. The portion of the graph in which a decrease in price would cause total revenue to fall would be from _________.
e. The portion of the graph in which a decrease in price would cause total revenue to rise would be from _________.
f. The portion of the graph in which a decrease in price would not cause a change in total revenue would be _________.
g. The section of the graph in which total revenue would be at a maximum would be _______.
h. The section of the graph in which elasticity is greater than 1 is _______.
i. The section of the graph in which elasticity is equal to 1 is ______.
j. The section of the graph in which elasticity is less than 1 is _______.

Accepted Answer

a. A to B
b. B to C

Question 15

The cross-price elasticity of demand for substitute goods must be

Accepted Answer

A)  greater than one. 
B)  less than one. 
C)  zero. 
D)  greater than zero. 
A)  greater than one. 
B)  less than one. 
C)  zero. 
D)  greater than zero.

Question 16

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

If the price elasticity of supply equals zero, this implies that

If the cross-price elasticity between two goods is negative, the two goods are likely to be

If the price elasticity of demand within the price range from R10 to R12.50 per kilogram for carrots is 0.79 and for radishes is 1.6, then within that price range

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

The price elasticity of demand measures the

If the income elasticity of demand for a good is negative, it must be

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

The price elasticity of demand for a good measures the willingness of

If a demand curve is linear, the price elasticity of demand is constant along it.

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Which of the following statements about the price elasticity of demand is correct?

The demand for which of the following is likely to be the most price inelastic?

A government seeking to raise revenue would be most likely to tax a good with a

The cross-price elasticity of demand for substitute goods must be

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Interdependence and the Gains From Trade

Filters

Exam 4: Elasticity and Its Applications

If the price elasticity of supply equals zero, this implies that

If the cross-price elasticity between two goods is negative, the two goods are likely to be

If the price elasticity of demand within the price range from R10 to R12.50 per kilogram for carrots is 0.79 and for radishes is 1.6, then within that price range

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

The price elasticity of demand measures the

If the income elasticity of demand for a good is negative, it must be

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

The price elasticity of demand for a good measures the willingness of

If a demand curve is linear, the price elasticity of demand is constant along it.

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Which of the following statements about the price elasticity of demand is correct?

The demand for which of the following is likely to be the most price inelastic?

A government seeking to raise revenue would be most likely to tax a good with a

The cross-price elasticity of demand for substitute goods must be

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Interdependence and the Gains From Trade

Filters