Question 1

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 2

If the income elasticity for a particular good is 1.8,we would expect to see more of that good:

Accepted Answer

A) consumed in low-income communities. 
B) consumed by people on higher incomes. 
C) on supermarket shelves. 
D) consumed equally by all citizens. 
A) consumed in low-income communities. 
B) consumed by people on higher incomes. 
C) on supermarket shelves. 
D) consumed equally by all citizens.

Question 3

If the elasticity of demand is infinite,then we can say that demand is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the price of a bus ticket rises from $2.75 to $3 and the number of tickets sold falls from 10 000 to 8500,the price elasticity of demand is:

Accepted Answer

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

Question 5

Suppose the price of a bus ticket rises from $2.75 to $3.75 and the number of tickets sold falls from 10 000 to 8500,the price elasticity of demand is: :

Accepted Answer

A) 0.527. 
B) 1. 
C) -0.527. 
D) -1. 
A) 0.527. 
B) 1. 
C) -0.527. 
D) -1.

Question 6

When the price of bread increases by 5 per cent,the quantity demanded of crackers increases by 2 per cent.The cross elasticity of demand between crackers and bread is:

Accepted Answer

A) 0.67. 
B) 1.5. 
C) 2.5. 
D) 3.2. 
E) 0.4. 
A) 0.67. 
B) 1.5. 
C) 2.5. 
D) 3.2. 
E) 0.4.

Question 7

If demand price elasticity measures 2,this implies that consumers would:

Accepted Answer

A) buy twice as much of the product if the price drops 10 per cent. 
B) require a 2 per cent drop in price to increase their purchases by 1 per cent. 
C) buy 2 per cent more of the product in response to a 1 per cent drop in price. 
D) require at least a $2 increase in price before showing any response to the price increase. 
E) buy twice as much of the product if the price drops 1 per cent. 
A) buy twice as much of the product if the price drops 10 per cent. 
B) require a 2 per cent drop in price to increase their purchases by 1 per cent. 
C) buy 2 per cent more of the product in response to a 1 per cent drop in price. 
D) require at least a $2 increase in price before showing any response to the price increase. 
E) buy twice as much of the product if the price drops 1 per cent.

Question 8

The imposition of a tax on seller of a product normally results in an increase in market price,which is less than the full amount of the tax.

Accepted Answer

A) True 
 B)False

Question 9

Applying supply and demand analysis,with other factors held constant,the steeper the supply curve (more inelastic),the larger the burden of a sales tax that is borne by the sellers.

Accepted Answer

A) True 
 B)False

Question 10

Consumers will reduce their demand if they believe that the price increase is:

Accepted Answer

A) negligible. 
B) affordable. 
C) avoidable. 
D) temporary. 
A) negligible. 
B) affordable. 
C) avoidable. 
D) temporary.

Question 11

If Sam,the Pizza Man,lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week,then the demand for Sam's pizzas in this range is:

Accepted Answer

A) 3.5. 
B) 0.5. 
C) 1. 
D) 2.2. 
E) 0.8. 
A) 3.5. 
B) 0.5. 
C) 1. 
D) 2.2. 
E) 0.8.

Question 12

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles,then according to the averaging equation,the value of price elasticity of demand for Pepsi-Cola is:

Accepted Answer

A) 0.5. 
B) 0.25. 
C) 1. 
D) 3. 
E) 2. 
A) 0.5. 
B) 0.25. 
C) 1. 
D) 3. 
E) 2.

Question 13

If Pete raises the price of his muffins from $2 to $3 and his sales revenue increases from $35 000 to $38 000,then:

Accepted Answer

A) the demand for Pete's muffins in this range is price elastic. 
B) the demand for Pete's muffins in this range is price inelastic. 
C) the demand for Pete's muffins in this range is unit elastic. 
D) the percentage change in quantity demanded must exceed the percentage change in product price. 
E) this is impossible since this would violate the law of demand. 
A) the demand for Pete's muffins in this range is price elastic. 
B) the demand for Pete's muffins in this range is price inelastic. 
C) the demand for Pete's muffins in this range is unit elastic. 
D) the percentage change in quantity demanded must exceed the percentage change in product price. 
E) this is impossible since this would violate the law of demand.

Question 14

Any downward-sloping straight line demand curve displays:

Accepted Answer

A) elastic and inelastic demand. 
B) positive and strong demand. 
C) elastic, inelastic and negligible demand. 
D) elastic, inelastic and unitary elastic demand. 
A) elastic and inelastic demand. 
B) positive and strong demand. 
C) elastic, inelastic and negligible demand. 
D) elastic, inelastic and unitary elastic demand.

Question 15

If the price elasticity of demand is computed for two products and product A measures 0.79 and product B measures 1.6,then:

Accepted Answer

A)  product A is more price elastic than product B. 
B)  the cross price elasticity of product B is less than that of the product A. 
C)  consumers are more sensitive to price changes in product B than in product A. 
D)  product B is more price inelastic than product A. 
E)  products A and B must be substitutes. 
A)  product A is more price elastic than product B. 
B)  the cross price elasticity of product B is less than that of the product A. 
C)  consumers are more sensitive to price changes in product B than in product A. 
D)  product B is more price inelastic than product A. 
E)  products A and B must be substitutes.

Question 16

If the managers of a bus system find that revenues increase when fares are raised,they would conclude that price elasticity demand for a subway service is inelastic.

Accepted Answer

A) True 
 B)False

Question 17

Cars have higher price elasticity of demand than tyres and tubes because:

Accepted Answer

A) tyres and tubes and cars are substitutes. 
B) tyres and tubes and cars are complements. 
C) cars are a luxury and tyres and tubes are a necessity. 
D) tyres and tubes are a luxury and cars are a necessity. 
A) tyres and tubes and cars are substitutes. 
B) tyres and tubes and cars are complements. 
C) cars are a luxury and tyres and tubes are a necessity. 
D) tyres and tubes are a luxury and cars are a necessity.

Question 18

For many people with diabetes,insulin would have an elasticity of demand of:

Accepted Answer

A) infinity. 
B) one. 
C) zero. 
D) greater than one. 
E) indeterminate. 
A) infinity. 
B) one. 
C) zero. 
D) greater than one. 
E) indeterminate.

Question 19

If Coke and Pepsi are close substitutes,then if:

Accepted Answer

A) Coke raises its price, so will Pepsi. 
B) Coke raises its price, it will not lose customers to Pepsi. 
C) Pepsi lowers its price, it will not hurt Coke. 
D) Pepsi lowers its price, so will Coke. 
E) Coke raises its price, some customers will switch to Pepsi. 
A) Coke raises its price, so will Pepsi. 
B) Coke raises its price, it will not lose customers to Pepsi. 
C) Pepsi lowers its price, it will not hurt Coke. 
D) Pepsi lowers its price, so will Coke. 
E) Coke raises its price, some customers will switch to Pepsi.

Question 20

Price elasticity of demand can be:

Accepted Answer

A) only greater than 1. 
B) equal to 1, greater than 1, less than 1. 
C) only less than 1. 
D) only equal to 1. 
A) only greater than 1. 
B) equal to 1, greater than 1, less than 1. 
C) only less than 1. 
D) only equal to 1.

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

If the income elasticity for a particular good is 1.8,we would expect to see more of that good:

If the elasticity of demand is infinite,then we can say that demand is perfectly inelastic.

Suppose the price of a bus ticket rises from $2.75 to $3 and the number of tickets sold falls from 10 000 to 8500,the price elasticity of demand is:

Suppose the price of a bus ticket rises from $2.75 to $3.75 and the number of tickets sold falls from 10 000 to 8500,the price elasticity of demand is: :

When the price of bread increases by 5 per cent,the quantity demanded of crackers increases by 2 per cent.The cross elasticity of demand between crackers and bread is:

If demand price elasticity measures 2,this implies that consumers would:

The imposition of a tax on seller of a product normally results in an increase in market price,which is less than the full amount of the tax.

Applying supply and demand analysis,with other factors held constant,the steeper the supply curve (more inelastic),the larger the burden of a sales tax that is borne by the sellers.

Consumers will reduce their demand if they believe that the price increase is:

If Sam,the Pizza Man,lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week,then the demand for Sam's pizzas in this range is:

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles,then according to the averaging equation,the value of price elasticity of demand for Pepsi-Cola is:

If Pete raises the price of his muffins from $2 to $3 and his sales revenue increases from $35 000 to $38 000,then:

Any downward-sloping straight line demand curve displays:

If the price elasticity of demand is computed for two products and product A measures 0.79 and product B measures 1.6,then:

If the managers of a bus system find that revenues increase when fares are raised,they would conclude that price elasticity demand for a subway service is inelastic.

Cars have higher price elasticity of demand than tyres and tubes because:

For many people with diabetes,insulin would have an elasticity of demand of:

If Coke and Pepsi are close substitutes,then if:

Price elasticity of demand can be:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

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Exam 5: Elasticity of demand and supply

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

If the income elasticity for a particular good is 1.8,we would expect to see more of that good:

If the elasticity of demand is infinite,then we can say that demand is perfectly inelastic.

Suppose the price of a bus ticket rises from $2.75 to $3 and the number of tickets sold falls from 10 000 to 8500,the price elasticity of demand is:

Suppose the price of a bus ticket rises from $2.75 to $3.75 and the number of tickets sold falls from 10 000 to 8500,the price elasticity of demand is: :

When the price of bread increases by 5 per cent,the quantity demanded of crackers increases by 2 per cent.The cross elasticity of demand between crackers and bread is:

If demand price elasticity measures 2,this implies that consumers would:

The imposition of a tax on seller of a product normally results in an increase in market price,which is less than the full amount of the tax.

Applying supply and demand analysis,with other factors held constant,the steeper the supply curve (more inelastic),the larger the burden of a sales tax that is borne by the sellers.

Consumers will reduce their demand if they believe that the price increase is:

If Sam,the Pizza Man,lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week,then the demand for Sam's pizzas in this range is:

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles,then according to the averaging equation,the value of price elasticity of demand for Pepsi-Cola is:

If Pete raises the price of his muffins from $2 to $3 and his sales revenue increases from $35 000 to $38 000,then:

Any downward-sloping straight line demand curve displays:

If the price elasticity of demand is computed for two products and product A measures 0.79 and product B measures 1.6,then:

If the managers of a bus system find that revenues increase when fares are raised,they would conclude that price elasticity demand for a subway service is inelastic.

Cars have higher price elasticity of demand than tyres and tubes because:

For many people with diabetes,insulin would have an elasticity of demand of:

If Coke and Pepsi are close substitutes,then if:

Price elasticity of demand can be:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters