Question 1

Good M has an income elasticity of demand of -0.7. Which of the following items is good M?

Accepted Answer

A) bologna 
B) organic eggs 
C) cruise line tickets 
D) designer handbags 
A) bologna 
B) organic eggs 
C) cruise line tickets 
D) designer handbags

Question 2

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the products has a perfectly elastic supply curve?

Accepted Answer

A) product A 
B) product B 
C) product C 
D) product D 
A) product A 
B) product B 
C) product C 
D) product D

Question 3

The percentage change in quantity demanded divided by the percentage change in price is the _____.

Accepted Answer

A) price elasticity of demand 
B) quantity elasticity of demand 
C) income elasticity of demand 
D) cross-price elasticity of demand 
A) price elasticity of demand 
B) quantity elasticity of demand 
C) income elasticity of demand 
D) cross-price elasticity of demand

Question 4

Which statement is FALSE?

Accepted Answer

A) If the income elasticity of demand is positive, a good is normal. 
B) If the income elasticity of demand is negative, a good is inferior. 
C) The income elasticity of demand measures the responsiveness of quantity demanded to changes in consumers' incomes. 
D) The income elasticity of demand measures the responsiveness of consumers' incomes to changes in quantity demanded. 
A) If the income elasticity of demand is positive, a good is normal. 
B) If the income elasticity of demand is negative, a good is inferior. 
C) The income elasticity of demand measures the responsiveness of quantity demanded to changes in consumers' incomes. 
D) The income elasticity of demand measures the responsiveness of consumers' incomes to changes in quantity demanded.

Question 5

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which one of the supply curves probably belongs to a seller who has a large stock of product available for sale?

Accepted Answer

A) product A 
B) product B 
C) product C 
D) product D 
A) product A 
B) product B 
C) product C 
D) product D

Question 6

You are given data on four products - toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand?

Accepted Answer

A) toothpaste 
B) shampoo 
C) soap 
D) laundry detergent 
A) toothpaste 
B) shampoo 
C) soap 
D) laundry detergent

Question 7

The university hopes to raise more revenue by increasing student housing fees. This plan will work only if:

Accepted Answer

A) the percent rise in price is larger in magnitude than the percent decline in quantity demanded. 
B) the percent rise in price is smaller in magnitude than the percent decline in quantity demanded. 
C) the percent decrease in price is smaller in magnitude than the percent decline in quantity demanded. 
D) the percent decrease in price is larger in magnitude than the percent increase in quantity demanded. 
A) the percent rise in price is larger in magnitude than the percent decline in quantity demanded. 
B) the percent rise in price is smaller in magnitude than the percent decline in quantity demanded. 
C) the percent decrease in price is smaller in magnitude than the percent decline in quantity demanded. 
D) the percent decrease in price is larger in magnitude than the percent increase in quantity demanded.

Question 8

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C, and D. Which of the products has the most inelastic demand curve?

Accepted Answer

A) product A 
B) product B 
C) product C 
D) product D 
A) product A 
B) product B 
C) product C 
D) product D

Question 9

If the price of a good increases by 15%, and quantity demanded changes by 5%, then the price elasticity of demand is equal to:

Accepted Answer

A) 0.75. 
B) approximately 0.33. 
C) approximately 1.33. 
D) 1. 
A) 0.75. 
B) approximately 0.33. 
C) approximately 1.33. 
D) 1.

Question 10

If the price of a good increases by 10%, and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

Accepted Answer

A) 1.5. 
B) approximately 0.66. 
C) approximately 1.33. 
D) 1. 
A) 1.5. 
B) approximately 0.66. 
C) approximately 1.33. 
D) 1.

Question 11

If an item is a necessity rather than a luxury, its demand curve will be:

Accepted Answer

A) perfectly elastic. 
B) perfectly inelastic. 
C) relatively steep. 
D) relatively flat. 
A) perfectly elastic. 
B) perfectly inelastic. 
C) relatively steep. 
D) relatively flat.

Question 12

Which of the following individuals is LEAST likely to lose their job if the economy is doing poorly?

Accepted Answer

A) Francesca, who works as a computer repair technician 
B) Mercy, who works as a server in a high-end restaurant 
C) Kamau, who works at a designer handbag store 
D) Maruichi, who works as a manager at a fast-food restaurant 
A) Francesca, who works as a computer repair technician 
B) Mercy, who works as a server in a high-end restaurant 
C) Kamau, who works at a designer handbag store 
D) Maruichi, who works as a manager at a fast-food restaurant

Question 13

(Figure: Demand Curve for Pears) Use Figure: Demand Curve for Pears. The figure shows a demand curve that is:

Accepted Answer

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

Question 14

The price elasticity of demand for an item is impacted by:

Accepted Answer

A) whether or not the item is a necessity. 
B) the time available to adjust to price changes. 
C) the number of available substitutes. 
D) all of these options. 
A) whether or not the item is a necessity. 
B) the time available to adjust to price changes. 
C) the number of available substitutes. 
D) all of these options.

Question 15

(Figure: Supply Curve for Peaches) Use Figure: Supply Curve for Peaches. The figure depicts a supply curve that is:

Accepted Answer

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

Question 16

The cross-price elasticity of demand between Fanta and Dr. Pepper has been estimated at 0.61. If the price of Dr. Pepper falls by 10%, the quantity demanded of Fanta will:

Accepted Answer

A) decrease by less than 6.1%. 
B) decrease by 6.1%. 
C) not change because many people prefer Fanta to Dr. Pepper. 
D) increase. 
A) decrease by less than 6.1%. 
B) decrease by 6.1%. 
C) not change because many people prefer Fanta to Dr. Pepper. 
D) increase.

Question 17

The price of a gallon of milk rises from $2 to $2.60. In response to this price change, the quantity demanded for milk falls by 5%. The absolute value of the price elasticity of demand for milk is _____, and the price elasticity of demand is _____.

Accepted Answer

A) 6; elastic 
B) 6; inelastic 
C) 0.17; elastic 
D) 0.17; inelastic 
A) 6; elastic 
B) 6; inelastic 
C) 0.17; elastic 
D) 0.17; inelastic

Question 18

(Figure: Estimating Price Elasticity in the Market for Garden Gnomes) Use Figure: Estimating Price Elasticity in the Market for Garden Gnomes. Which demand curve is perfectly inelastic?

Accepted Answer

A) D1 
B) D2 
C) D3 
D) D4 
A) D1 
B) D2 
C) D3 
D) D4

Question 19

The price elasticity of demand is measured as the percentage change in _____ divided by the percentage change in _____.

Accepted Answer

A) price; quantity demanded 
B) quantity demanded; price 
C) the slope of the demand curve; quantity demanded 
D) quantity demanded; the slope of the demand curve 
A) price; quantity demanded 
B) quantity demanded; price 
C) the slope of the demand curve; quantity demanded 
D) quantity demanded; the slope of the demand curve

Question 20

Janelle recently received a promotion at her job, increasing her income from $940 per week to $1,060 per week. As a result, she decides to purchase 9% more sushi per week. Computed using the midpoint method, the income elasticity of Janelle's demand for sushi is:

Accepted Answer

A) 0.75. 
B) 1.33. 
C) 0.90. 
D) 1.00. 
A) 0.75. 
B) 1.33. 
C) 0.90. 
D) 1.00.

Exam 5: Elasticity: Measuring Responsiveness

Good M has an income elasticity of demand of -0.7. Which of the following items is good M?

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the products has a perfectly elastic supply curve?

The percentage change in quantity demanded divided by the percentage change in price is the _____.

Which statement is FALSE?

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which one of the supply curves probably belongs to a seller who has a large stock of product available for sale?

The university hopes to raise more revenue by increasing student housing fees. This plan will work only if:

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C, and D. Which of the products has the most inelastic demand curve?

If the price of a good increases by 15%, and quantity demanded changes by 5%, then the price elasticity of demand is equal to:

If the price of a good increases by 10%, and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

If an item is a necessity rather than a luxury, its demand curve will be:

Which of the following individuals is LEAST likely to lose their job if the economy is doing poorly?

(Figure: Demand Curve for Pears) Use Figure: Demand Curve for Pears. The figure shows a demand curve that is:

The price elasticity of demand for an item is impacted by:

(Figure: Supply Curve for Peaches) Use Figure: Supply Curve for Peaches. The figure depicts a supply curve that is:

The cross-price elasticity of demand between Fanta and Dr. Pepper has been estimated at 0.61. If the price of Dr. Pepper falls by 10%, the quantity demanded of Fanta will:

The price of a gallon of milk rises from $2 to $2.60. In response to this price change, the quantity demanded for milk falls by 5%. The absolute value of the price elasticity of demand for milk is _____, and the price elasticity of demand is _____.

(Figure: Estimating Price Elasticity in the Market for Garden Gnomes) Use Figure: Estimating Price Elasticity in the Market for Garden Gnomes. Which demand curve is perfectly inelastic?

The price elasticity of demand is measured as the percentage change in _____ divided by the percentage change in _____.

Janelle recently received a promotion at her job, increasing her income from $940 per week to $1,060 per week. As a result, she decides to purchase 9% more sushi per week. Computed using the midpoint method, the income elasticity of Janelle's demand for sushi is:

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Externalities and Public Goods

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Entry, Exit, and Long-Run Profitability

Business Strategy

Sophisticated Pricing Strategies

Game Theory and Strategic Choices

Decisions Involving Uncertainty

Decisions With Private Information

Sizing up the Economy Using Gdp

Economic Growth

Unemployment

Inflation and Money

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

The Fed Model: Linking Interest Rates, Output, and Inflation

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

Filters

The price of a gallon of milk rises from $2 to $2.60. In response to this price change, the quantity demanded for milk falls by 5%. The absolute value of the price elasticity of demand for milk is _, and the price elasticity of demand is _.

The price elasticity of demand is measured as the percentage change in _ divided by the percentage change in _.