Question 1

The elasticity formula solves the units problem because percentages are unaffected by the units of measure.

Accepted Answer

A) True 
 B)False

Question 2

Necessities such as food and shelter have inelastic demand.

Accepted Answer

A) True 
 B)False

Question 3

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi. A successful campaign would be indicated if the cross elasticity went from

Accepted Answer

A) 0.9 to 0.5. 
B) 0.9 to 1.5. 
C) −0.5 to −0.2. 
D) −0.9 to −1.5. 
A) 0.9 to 0.5. 
B) 0.9 to 1.5. 
C) −0.5 to −0.2. 
D) −0.9 to −1.5.

Question 4

A unit-elastic demand curve will be concave toward the origin .

Accepted Answer

A) True 
 B)False

Question 5

Elasticity of demand is calculated using percentage changes in both price and quantity.

Accepted Answer

A) True 
 B)False

Question 6

A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 7

Elasticity

Accepted Answer

A) deals with percentage changes in price and quantity demanded. 
B) employs percentage changes calculated in terms of average values of the prices and quantities at issue. 
C) is generally stated in absolute value. 
D) All of the responses are correct. 
A) deals with percentage changes in price and quantity demanded. 
B) employs percentage changes calculated in terms of average values of the prices and quantities at issue. 
C) is generally stated in absolute value. 
D) All of the responses are correct.

Question 8

The slope of the demand curve conveys all the useful information about elasticity.

Accepted Answer

A) True 
 B)False

Question 9

Along the elastic portion of a demand curve, the

Accepted Answer

A) change in price will always be greater than the change in quantity demanded. 
B) percentage change in quantity demanded will be less than the percentage change in price. 
C) change in price will always be less than the change in quantity demanded. 
D) percentage change in price will be less than the percentage change in quantity demanded. 
A) change in price will always be greater than the change in quantity demanded. 
B) percentage change in quantity demanded will be less than the percentage change in price. 
C) change in price will always be less than the change in quantity demanded. 
D) percentage change in price will be less than the percentage change in quantity demanded.

Question 10

As a result of a decline in interest rates and a rise in household income, the demand curve for housing has shifted to the right, but has retained the same slope. Consequently, the elasticity of demand for housing

Accepted Answer

A) has declined. 
B) has increased. 
C) has remained unchanged. 
D) cannot be compared. 
A) has declined. 
B) has increased. 
C) has remained unchanged. 
D) cannot be compared.

Question 11

In 1975, New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount. The taxi commission believed taxi demand was

Accepted Answer

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

Question 12

The measure used to determine whether two products are substitutes or complements is called

Accepted Answer

A) price elasticity of demand. 
B) income elasticity of demand. 
C) cross elasticity of demand. 
D) inverse elasticity of demand. 
A) price elasticity of demand. 
B) income elasticity of demand. 
C) cross elasticity of demand. 
D) inverse elasticity of demand.

Question 13

When price falls, demand rises.

Accepted Answer

A) True 
 B)False

Question 14

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

Accepted Answer

A) True 
 B)False

Question 15

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Accepted Answer

A) True 
 B)False

Question 16

Along a straight-line demand curve (dropping all minus signs), the price elasticity of demand

Accepted Answer

A) gets larger as quantity demanded gets larger. 
B) gets smaller as quantity demanded gets larger. 
C) always equals one. 
D) is constant (though not necessarily equal to one). 
A) gets larger as quantity demanded gets larger. 
B) gets smaller as quantity demanded gets larger. 
C) always equals one. 
D) is constant (though not necessarily equal to one).

Question 17

Which of the following goods will have the most elastic demand at any time?

Accepted Answer

A) Coffee 
B) Gasoline 
C) Restaurant meals 
D) Insulin 
A) Coffee 
B) Gasoline 
C) Restaurant meals 
D) Insulin

Question 18

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

Accepted Answer

A) True 
 B)False

Question 19

Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Accepted Answer

A) True 
 B)False

Question 20

All straight-line demand curves have the same elasticity value since the slope is constant.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

The elasticity formula solves the units problem because percentages are unaffected by the units of measure.

Necessities such as food and shelter have inelastic demand.

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi. A successful campaign would be indicated if the cross elasticity went from

A unit-elastic demand curve will be concave toward the origin .

Elasticity of demand is calculated using percentage changes in both price and quantity.

A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity demanded.

Elasticity

The slope of the demand curve conveys all the useful information about elasticity.

Along the elastic portion of a demand curve, the

As a result of a decline in interest rates and a rise in household income, the demand curve for housing has shifted to the right, but has retained the same slope. Consequently, the elasticity of demand for housing

In 1975, New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount. The taxi commission believed taxi demand was

The measure used to determine whether two products are substitutes or complements is called

When price falls, demand rises.

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Along a straight-line demand curve (dropping all minus signs), the price elasticity of demand

Which of the following goods will have the most elastic demand at any time?

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

All straight-line demand curves have the same elasticity value since the slope is constant.

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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters