Question 1

A lower price elasticity of demand coefficient occurs when:

Accepted Answer

A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined. 
A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined.

Question 2

Elasticity has which special meaning for economists?

Accepted Answer

A)  b and c. 
B)  A ratio of percentage changes. 
C)  How easily prices adjust to market changes. 
D)  How price changes as quantities demanded change. 
E)  When consumers will no longer react to price changes. 
A)  b and c. 
B)  A ratio of percentage changes. 
C)  How easily prices adjust to market changes. 
D)  How price changes as quantities demanded change. 
E)  When consumers will no longer react to price changes.

Question 3

A product would be more demand price elastic:

Accepted Answer

A)  the shorter the time the consumer has to adjust to price changes. 
B)  the lower the price of the good. 
C)  the fewer the number of good substitutes. 
D)  the less the essential nature of the good. 
E)  if the supply is more price elastic. 
A)  the shorter the time the consumer has to adjust to price changes. 
B)  the lower the price of the good. 
C)  the fewer the number of good substitutes. 
D)  the less the essential nature of the good. 
E)  if the supply is more price elastic.

Question 4

The price elasticity of demand coefficient for a good will be greater:

Accepted Answer

A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short-run. 
D)  if a small portion of the budget will be spent on it. 
A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short-run. 
D)  if a small portion of the budget will be spent on it.

Question 5

If the demand for cigarettes is highly inelastic, this indicates that:

Accepted Answer

A)  higher cigarette prices will increase the demand for cigarettes. 
B)  the price elasticity coefficient of cigarettes exceeds 1. 
C)  the price elasticity coefficient of cigarettes equals 1. 
D)  the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes. 
A)  higher cigarette prices will increase the demand for cigarettes. 
B)  the price elasticity coefficient of cigarettes exceeds 1. 
C)  the price elasticity coefficient of cigarettes equals 1. 
D)  the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.

Question 6

Suppose an increase in symphony tickets prices reduces the total revenue. This is evidence that demand is:

Accepted Answer

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

Question 7

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

Accepted Answer

A)  zero. 
B)  1. 
C)  greater than 1, but less than infinity. 
D)  less than 1, but greater than zero. 
E)  infinity. 
A)  zero. 
B)  1. 
C)  greater than 1, but less than infinity. 
D)  less than 1, but greater than zero. 
E)  infinity.

Question 8

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

Accepted Answer

A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
E)  a relative increase in income. 
A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
E)  a relative increase in income.

Question 9

If demand is perfectly inelastic, then the demand curve will be vertical.

Accepted Answer

A) True 
 B)False

Question 10

A horizontal demand curve is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 5-3  Demand curves for gallons of orange juice   Using Exhibit 5-3, whose elasticity of demand is greatest when the price falls from $7 to $6?

Accepted Answer

A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward 
A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward

Question 12

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

Accepted Answer

A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product. 
A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product.

Question 13

Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

Accepted Answer

A)  Demand is perfectly inelastic. 
B)  Demand is inelastic, but not perfectly. 
C)  Demand is unitary classic. 
D)  Demand is elastic, but not perfectly. 
E)  Demand is perfectly elastic. 
A)  Demand is perfectly inelastic. 
B)  Demand is inelastic, but not perfectly. 
C)  Demand is unitary classic. 
D)  Demand is elastic, but not perfectly. 
E)  Demand is perfectly elastic.

Question 14

Exhibit 5-1  Demand curves   In Exhibit 5-1, the demand curve between points b and c is:

Accepted Answer

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

Question 15

Exhibit 5-5  Demand curve for computers   In Exhibit 5-5, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  nonelastic. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  nonelastic.

Question 16

The price elastic portion of the linear demand curve lies:

Accepted Answer

A)  b and c. 
B)  above the point of unit elasticity. 
C)  anywhere to the left of current market prices. 
D)  below the point where total revenue is maximized. 
E)  at the intersection with the supply curve. 
A)  b and c. 
B)  above the point of unit elasticity. 
C)  anywhere to the left of current market prices. 
D)  below the point where total revenue is maximized. 
E)  at the intersection with the supply curve.

Question 17

The price elasticity of demand for gasoline measures the:

Accepted Answer

A)  responsiveness of gasoline producers to changes in the quality of gasoline. 
B)  responsiveness of customers to changes in the price of gasoline. 
C)  responsiveness of consumer preferences to changes in the quality of gasoline. 
D)  both a and c above. 
A)  responsiveness of gasoline producers to changes in the quality of gasoline. 
B)  responsiveness of customers to changes in the price of gasoline. 
C)  responsiveness of consumer preferences to changes in the quality of gasoline. 
D)  both a and c above.

Question 18

If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unit elastic with respect to price. 
D)  perfectly inelastic. 
A)  price elastic. 
B)  price inelastic. 
C)  unit elastic with respect to price. 
D)  perfectly inelastic.

Question 19

Another word for elasticity is:

Accepted Answer

A)  responsiveness. 
B)  happiness. 
C)  bonus 
D)  profit. 
E)  surplus. 
A)  responsiveness. 
B)  happiness. 
C)  bonus 
D)  profit. 
E)  surplus.

Question 20

If the demand curve is unit elastic, this implies that:

Accepted Answer

A)  consumers do not react to a change in product price. 
B)  the good can only be purchased in units of 1. 
C)  this good has no good substitutes. 
D)  the good is a basic food staple. 
E)  the percentage change in the quantity demanded = the percentage change in product price. 
A)  consumers do not react to a change in product price. 
B)  the good can only be purchased in units of 1. 
C)  this good has no good substitutes. 
D)  the good is a basic food staple. 
E)  the percentage change in the quantity demanded = the percentage change in product price.

Exam 5: Price Elasticity of Demand

A lower price elasticity of demand coefficient occurs when:

Elasticity has which special meaning for economists?

A product would be more demand price elastic:

The price elasticity of demand coefficient for a good will be greater:

If the demand for cigarettes is highly inelastic, this indicates that:

Suppose an increase in symphony tickets prices reduces the total revenue. This is evidence that demand is:

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

If demand is perfectly inelastic, then the demand curve will be vertical.

A horizontal demand curve is perfectly elastic.

Exhibit 5-3 Demand curves for gallons of orange juice Using Exhibit 5-3, whose elasticity of demand is greatest when the price falls from $7 to $6?

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

Exhibit 5-1 Demand curves In Exhibit 5-1, the demand curve between points b and c is:

Exhibit 5-5 Demand curve for computers In Exhibit 5-5, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is:

The price elastic portion of the linear demand curve lies:

The price elasticity of demand for gasoline measures the:

If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is:

Another word for elasticity is:

If the demand curve is unit elastic, this implies that:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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