Question 1

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:

Accepted Answer

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

Question 2

Other factors held constant, if there are few close substitutes for a good, demand is more elastic for it.

Accepted Answer

A) True 
 B)False

Question 3

Which statement about price elasticity of demand along a linear demand curve is true ?

Accepted Answer

A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases. 
E)  When an individual buys 4 units of a good his/her elasticity of demand for each unit increases. 
A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases. 
E)  When an individual buys 4 units of a good his/her elasticity of demand for each unit increases.

Question 4

A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent. We can conclude that the demand for housing is:

Accepted Answer

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

Question 5

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

Accepted Answer

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

Question 6

If demand is inelastic, an increase in the price of a good will cause total revenue to:

Accepted Answer

A)  fall. 
B)  remain constant since the decrease in quantity sold is exactly offset by the price increase. 
C)  rise. 
D)  rise if it is a normal good and fall if it is an inferior good. 
A)  fall. 
B)  remain constant since the decrease in quantity sold is exactly offset by the price increase. 
C)  rise. 
D)  rise if it is a normal good and fall if it is an inferior good.

Question 7

In the long run, price elasticities of demand are usually ____.

Accepted Answer

A)  less than they are in the short run because people can adjust 
B)  the same as they are in the short run because tastes don't change 
C)  greater than they are in the short run because prices rise over time 
D)  less than they are in the short run because real prices fall over time 
E)  greater than they are in the short run because consumers have time to adjust 
A)  less than they are in the short run because people can adjust 
B)  the same as they are in the short run because tastes don't change 
C)  greater than they are in the short run because prices rise over time 
D)  less than they are in the short run because real prices fall over time 
E)  greater than they are in the short run because consumers have time to adjust

Question 8

The fewer the substitutes for a good the greater will be the value of the price elasticity of demand coefficient.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 5-6  Demand curve for concert tickets   In Exhibit 5-6, the demand curve for concert tickets shown above is classified as:

Accepted Answer

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

Question 10

Price elasticity of demand refers to the ratio of the:

Accepted Answer

A)  percentage change in price of a good in response to a percentage change in quantity demanded. 
B)  percentage change in price of a good to a percentage increase in income. 
C)  percentage change in the quantity demanded of a good to a percentage change in its price. 
D)  none of the above. 
A)  percentage change in price of a good in response to a percentage change in quantity demanded. 
B)  percentage change in price of a good to a percentage increase in income. 
C)  percentage change in the quantity demanded of a good to a percentage change in its price. 
D)  none of the above.

Question 11

Leo's Bakery reduces the price of wheat bread from $3 to $1 and finds that quantity demanded increases from 100 to 122 loaves. Leo calculates that his price elasticity of demand for wheat bread is:

Accepted Answer

A)  0. 
B)  0.2. 
C)  1.0. 
D)  1.5. 
E)  2.0 
A)  0. 
B)  0.2. 
C)  1.0. 
D)  1.5. 
E)  2.0

Question 12

Demand price elasticity measures:

Accepted Answer

A)  how much supply will change as price changes. 
B)  how consumers change their purchases in response to a change in income. 
C)  how consumers change their purchases in response to a change in the price of a substitute good. 
D)  how consumers change their purchases in response to a change in the price of a product. 
E)  the change in price brought about by a change in consumer demand. 
A)  how much supply will change as price changes. 
B)  how consumers change their purchases in response to a change in income. 
C)  how consumers change their purchases in response to a change in the price of a substitute good. 
D)  how consumers change their purchases in response to a change in the price of a product. 
E)  the change in price brought about by a change in consumer demand.

Question 13

​ If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:

Accepted Answer

A)  ​ 0.2. 
B)  ​ 1. 
C)  ​2. 
D)  ​10. 
E)  ​Cannot be determined. 
A)  ​ 0.2. 
B)  ​ 1. 
C)  ​2. 
D)  ​10. 
E)  ​Cannot be determined.

Question 14

Any change in price along a perfectly inelastic demand curve produces:

Accepted Answer

A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded. 
A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded.

Question 15

Looking at the relationship between elasticity and total revenue, we can see that ____.

Accepted Answer

A)  b and c 
B)  when demand is unit elastic, small price changes don't change total revenue 
C)  when a good is price inelastic, revenue increases when prices increase 
D)  when a good is price elastic, revenue increases when prices increase 
E)  total revenue is maximized when the elasticity has stopped changing 
A)  b and c 
B)  when demand is unit elastic, small price changes don't change total revenue 
C)  when a good is price inelastic, revenue increases when prices increase 
D)  when a good is price elastic, revenue increases when prices increase 
E)  total revenue is maximized when the elasticity has stopped changing

Question 16

If Herbert, the hair stylist, raises the price of his cuts from $13 to $15 and finds the number of cuts falls from 300 to 260, then the demand for Herbert's cuts in this range is:

Accepted Answer

A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic. 
E)  income inelastic. 
A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic. 
E)  income inelastic.

Question 17

Suppose you are on a committee seeking to increase revenue from your city's bus system. If demand is _______, you would recommend raising the fare.​

Accepted Answer

A)  ​perfectly elastic 
B)  ​elastic 
C)  ​unitary elastic 
D)  inelastic​ 
A)  ​perfectly elastic 
B)  ​elastic 
C)  ​unitary elastic 
D)  inelastic​

Question 18

Exhibit 5-2  Price and quantity demanded data   The data in Exhibit 5-2 shows that price elasticity of demand is:

Accepted Answer

A)  increasing as the price decreases. 
B)  decreasing as the price increases. 
C)  increasing as the quantity increases. 
D)  decreasing as the quantity decreases. 
E)  decreasing as the quantity increases. 
A)  increasing as the price decreases. 
B)  decreasing as the price increases. 
C)  increasing as the quantity increases. 
D)  decreasing as the quantity decreases. 
E)  decreasing as the quantity increases.

Question 19

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Accepted Answer

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

Question 20

A health club sells 50 memberships when the monthly price is $60 and 70 memberships when the monthly price is $40. The price elasticity of demand for memberships at this health club is (using the average values method):

Accepted Answer

A)  0.25. 
B)  0.6. 
C)  1.0. 
D)  1.1. 
E)  0.83 
A)  0.25. 
B)  0.6. 
C)  1.0. 
D)  1.1. 
E)  0.83

Exam 5: Price Elasticity of Demand

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:

Other factors held constant, if there are few close substitutes for a good, demand is more elastic for it.

Which statement about price elasticity of demand along a linear demand curve is true ?

A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent. We can conclude that the demand for housing is:

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

If demand is inelastic, an increase in the price of a good will cause total revenue to:

In the long run, price elasticities of demand are usually ____.

The fewer the substitutes for a good the greater will be the value of the price elasticity of demand coefficient.

Exhibit 5-6 Demand curve for concert tickets In Exhibit 5-6, the demand curve for concert tickets shown above is classified as:

Price elasticity of demand refers to the ratio of the:

Leo's Bakery reduces the price of wheat bread from $3 to $1 and finds that quantity demanded increases from 100 to 122 loaves. Leo calculates that his price elasticity of demand for wheat bread is:

Demand price elasticity measures:

​ If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:

Any change in price along a perfectly inelastic demand curve produces:

Looking at the relationship between elasticity and total revenue, we can see that ____.

If Herbert, the hair stylist, raises the price of his cuts from $13 to $15 and finds the number of cuts falls from 300 to 260, then the demand for Herbert's cuts in this range is:

Suppose you are on a committee seeking to increase revenue from your city's bus system. If demand is _______, you would recommend raising the fare.​

Exhibit 5-2 Price and quantity demanded data The data in Exhibit 5-2 shows that price elasticity of demand is:

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

A health club sells 50 memberships when the monthly price is $60 and 70 memberships when the monthly price is $40. The price elasticity of demand for memberships at this health club is (using the average values method):

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

Filters

If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:

Suppose you are on a committee seeking to increase revenue from your city's bus system. If demand is _______, you would recommend raising the fare.