Question 1

A good that has an income elasticity greater than 1 is a(n) _____ good.

Accepted Answer

A)  inferior 
B)  complementary 
C)  normal 
D)  luxury 
A)  inferior 
B)  complementary 
C)  normal 
D)  luxury

Question 2

A good with an income elasticity that is negative is a(n) _____ good.

Accepted Answer

A)  inferior 
B)  superior 
C)  normal 
D)  luxury 
A)  inferior 
B)  superior 
C)  normal 
D)  luxury

Question 3

Last year, Paula's income was $15,000 and she enrolled in 12 hours of courses in college. This year, Paula's income is $35,000 and she is enrolled in 3 hours of courses in college. For Paula, college is a(n) ____ good.

Accepted Answer

A)  inferior 
B)  normal 
C)  luxury 
D)  substitute 
A)  inferior 
B)  normal 
C)  luxury 
D)  substitute

Question 4

(Figure) The figure shows two demand curves for the same product for two different periods. When the price falls from $10 to $5, the price elasticity of demand using the midpoint method will be _____ for the short run and _____for the long run.

Accepted Answer

A)  0.33; 0.6 
B)  3.03; 0.6 
C)  0.33; 1.67 
D)  3.03; 1.67 
A)  0.33; 0.6 
B)  3.03; 0.6 
C)  0.33; 1.67 
D)  3.03; 1.67

Question 5

Using the equation TR = P × Q, explain the effect of elasticity on total revenue if price increases.

Accepted Answer

An increase in price would have two effe

Question 6

Using the concept of elasticity, explain why sin taxes (excise taxes on alcohol and tobacco) are popular with taxing authorities.

Accepted Answer

Excise taxes are sales taxes placed on s

Question 7

The incidence of a tax falls only the person on whom the tax is levied.

Accepted Answer

A) True 
 B)False

Question 8

(Table) According to the table, a reduction in the price of honey from $6 to $4 will cause the total amount of money spent on honey to
$\begin{array}{|l|l|}
\hline \begin{array}{l}
\text { Price of a Jar } \
\text { of Honey }
\end{array} & \begin{array}{l}
\text { Quantity of Honey } \
\text { (millions of jars) }
\end{array} \
\hline \$ 2 & 10 \
\hline 4 & 8 \
\hline 6 & 6 \
\hline
\end{array}$

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  fall to zero. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  fall to zero.

Question 9

If demand is inelastic, an increase in price

Accepted Answer

A)  reduces total revenue. 
B)  leaves total revenue unaffected. 
C)  increases total revenue. 
D)  increases the quantity demanded. 
A)  reduces total revenue. 
B)  leaves total revenue unaffected. 
C)  increases total revenue. 
D)  increases the quantity demanded.

Question 10

Price elasticity of demand is a measure of how responsive a change in quantity demanded is to a change in

Accepted Answer

A)  price. 
B)  consumer preferences. 
C)  supply. 
D)  interest rates. 
A)  price. 
B)  consumer preferences. 
C)  supply. 
D)  interest rates.

Question 11

Home heating gas tends to have _____ demand because _____.

Accepted Answer

A)  elastic; it has many close substitutes 
B)  elastic; it is a necessity 
C)  inelastic; people do not have time to adjust their consumption patterns 
D)  inelastic; people spend a large share of their incomes on heat 
A)  elastic; it has many close substitutes 
B)  elastic; it is a necessity 
C)  inelastic; people do not have time to adjust their consumption patterns 
D)  inelastic; people spend a large share of their incomes on heat

Question 12

If the price elasticity of demand for tofu is 1.7 and the price for a pound of tofu increases by 10%, then total spending on tofu will

Accepted Answer

A)  increase. 
B)  remain the same. 
C)  decrease. 
D)  be zero. 
A)  increase. 
B)  remain the same. 
C)  decrease. 
D)  be zero.

Question 13

If a good has an elasticity of demand equal to 1, then demand for the good is

Accepted Answer

A)  highly inelastic. 
B)  unitary elastic. 
C)  not elastic. 
D)  highly elastic. 
A)  highly inelastic. 
B)  unitary elastic. 
C)  not elastic. 
D)  highly elastic.

Question 14

When the price of a good decreases from $10 to $8, the quantity supplied of the good decreases from 80 to 65 units. The price elasticity of supply is

Accepted Answer

A)  0.75. 
B)  0.80. 
C)  0.93. 
D)  0.60. 
A)  0.75. 
B)  0.80. 
C)  0.93. 
D)  0.60.

Question 15

(Figure) The graph depicts a market with a supply tax. Using the equilibrium prices and quantities before and after the tax, the price elasticity of demand is _____. Use the midpoint method to calculate your answers.

Accepted Answer

A)  0.45 
B)  1.8 
C)  2.2 
D)  1.01 
A)  0.45 
B)  1.8 
C)  2.2 
D)  1.01

Question 16

Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 to 55 units. You consider the good to be a(n) _____ good.

Accepted Answer

A)  normal 
B)  substitute 
C)  inferior 
D)  luxury 
A)  normal 
B)  substitute 
C)  inferior 
D)  luxury

Question 17

Which of these could be a possible cross elasticity of demand measure for peanut butter and jelly?

Accepted Answer

A)  0 
B)  0.8 
C)  1.8 
D)  -0.8 
A)  0 
B)  0.8 
C)  1.8 
D)  -0.8

Question 18

Suppose that Nisshodo's Mochi shop raises the price of its mochi by 10% and its total revenue increased. This would mean that the demand for mochi is

Accepted Answer

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

Question 19

In general, the longer the period producers have to make adjustments, the

Accepted Answer

A)  less elastic is the supply curve. 
B)  fewer the adjustments firms can make to price changes. 
C)  more elastic is the supply curve. 
D)  steeper is the supply curve. 
A)  less elastic is the supply curve. 
B)  fewer the adjustments firms can make to price changes. 
C)  more elastic is the supply curve. 
D)  steeper is the supply curve.

Question 20

Suppose that the quantity demanded of a product rises by 9% as incomes rise by 3%. What type of good is this product?

Accepted Answer

A)  inferior 
B)  luxury 
C)  normal 
D)  substitute 
A)  inferior 
B)  luxury 
C)  normal 
D)  substitute

A good that has an income elasticity greater than 1 is a(n) _____ good.

A good with an income elasticity that is negative is a(n) _____ good.

Last year, Paula's income was $15,000 and she enrolled in 12 hours of courses in college. This year, Paula's income is $35,000 and she is enrolled in 3 hours of courses in college. For Paula, college is a(n) ____ good.

(Figure) The figure shows two demand curves for the same product for two different periods. When the price falls from $10 to $5, the price elasticity of demand using the midpoint method will be _ for the short run and _for the long run.

Using the equation TR = P × Q, explain the effect of elasticity on total revenue if price increases.

Using the concept of elasticity, explain why sin taxes (excise taxes on alcohol and tobacco) are popular with taxing authorities.

The incidence of a tax falls only the person on whom the tax is levied.

(Table) According to the table, a reduction in the price of honey from $6 to $4 will cause the total amount of money spent on honey to Price of a Jar of Honey Quantity of Honey (millions of jars) \ 2 10 4 8 6 6

If demand is inelastic, an increase in price

Price elasticity of demand is a measure of how responsive a change in quantity demanded is to a change in

Home heating gas tends to have _ demand because _.

If the price elasticity of demand for tofu is 1.7 and the price for a pound of tofu increases by 10%, then total spending on tofu will

If a good has an elasticity of demand equal to 1, then demand for the good is

When the price of a good decreases from $10 to $8, the quantity supplied of the good decreases from 80 to 65 units. The price elasticity of supply is

(Figure) The graph depicts a market with a supply tax. Using the equilibrium prices and quantities before and after the tax, the price elasticity of demand is _____. Use the midpoint method to calculate your answers.

Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 to 55 units. You consider the good to be a(n) _____ good.

Which of these could be a possible cross elasticity of demand measure for peanut butter and jelly?

Suppose that Nisshodo's Mochi shop raises the price of its mochi by 10% and its total revenue increased. This would mean that the demand for mochi is

In general, the longer the period producers have to make adjustments, the

Suppose that the quantity demanded of a product rises by 9% as incomes rise by 3%. What type of good is this product?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

Filters

Exam 5: Elasticity

A good that has an income elasticity greater than 1 is a(n) _____ good.

A good with an income elasticity that is negative is a(n) _____ good.

Last year, Paula's income was $15,000 and she enrolled in 12 hours of courses in college. This year, Paula's income is $35,000 and she is enrolled in 3 hours of courses in college. For Paula, college is a(n) ____ good.

(Figure) The figure shows two demand curves for the same product for two different periods. When the price falls from $10 to $5, the price elasticity of demand using the midpoint method will be _____ for the short run and _____for the long run.

Using the equation TR = P × Q, explain the effect of elasticity on total revenue if price increases.

Using the concept of elasticity, explain why sin taxes (excise taxes on alcohol and tobacco) are popular with taxing authorities.

The incidence of a tax falls only the person on whom the tax is levied.

(Table) According to the table, a reduction in the price of honey from $6 to $4 will cause the total amount of money spent on honey to Price of a Jar of Honey Quantity of Honey (millions of jars) \ 2 10 4 8 6 6

If demand is inelastic, an increase in price

Price elasticity of demand is a measure of how responsive a change in quantity demanded is to a change in

Home heating gas tends to have _____ demand because _____.

If the price elasticity of demand for tofu is 1.7 and the price for a pound of tofu increases by 10%, then total spending on tofu will

If a good has an elasticity of demand equal to 1, then demand for the good is

When the price of a good decreases from $10 to $8, the quantity supplied of the good decreases from 80 to 65 units. The price elasticity of supply is

(Figure) The graph depicts a market with a supply tax. Using the equilibrium prices and quantities before and after the tax, the price elasticity of demand is _____. Use the midpoint method to calculate your answers.

Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 to 55 units. You consider the good to be a(n) _____ good.

Which of these could be a possible cross elasticity of demand measure for peanut butter and jelly?

Suppose that Nisshodo's Mochi shop raises the price of its mochi by 10% and its total revenue increased. This would mean that the demand for mochi is

In general, the longer the period producers have to make adjustments, the

Suppose that the quantity demanded of a product rises by 9% as incomes rise by 3%. What type of good is this product?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

Filters

(Figure) The figure shows two demand curves for the same product for two different periods. When the price falls from $10 to $5, the price elasticity of demand using the midpoint method will be _ for the short run and _for the long run.

Home heating gas tends to have _ demand because _.