Question 1

Necessities tend to have price inelastic demands,whereas luxuries have price elastic demands.

Accepted Answer

A) True 
 B)False

Question 2

When her income increased from $30,000 to $40,000,Toby's consumption of macaroni decreased from 8 kilograms to 6 kilograms and her consumption of soy burgers increased from 3 kilograms to 4 kilograms.What can we conclude for Toby

Accepted Answer

A) Macaroni and soy burgers are both normal goods with income elasticities equal to 1. 
B) Macaroni is an inferior good and soy burgers are normal goods; both have income elasticities of 1. 
C) Macaroni is an inferior good with an income elasticity of -1, and soy burgers are normal goods with an income elasticity of 1. 
D) Macaroni and soy burgers are both inferior goods with income elasticities equal to -1. 
A) Macaroni and soy burgers are both normal goods with income elasticities equal to 1. 
B) Macaroni is an inferior good and soy burgers are normal goods; both have income elasticities of 1. 
C) Macaroni is an inferior good with an income elasticity of -1, and soy burgers are normal goods with an income elasticity of 1. 
D) Macaroni and soy burgers are both inferior goods with income elasticities equal to -1.

Question 3

Which of the following statements applies to a perfectly elastic supply curve

Accepted Answer

A) The elasticity of supply is 1. 
B) The supply curve is vertical. 
C) Very small changes in price lead to large changes in quantity supplied. 
D) The firm would likely be operating in the short run. 
A) The elasticity of supply is 1. 
B) The supply curve is vertical. 
C) Very small changes in price lead to large changes in quantity supplied. 
D) The firm would likely be operating in the short run.

Question 4

If the price elasticity of demand for a good is 3.0,what would result from a 10 percent increase in price

Accepted Answer

A) a 3 percent decrease in the quantity demanded 
B) a 10 percent decrease in the quantity demanded 
C) a 30 percent decrease in the quantity demanded 
D) a 300 percent decrease in the quantity demanded 
A) a 3 percent decrease in the quantity demanded 
B) a 10 percent decrease in the quantity demanded 
C) a 30 percent decrease in the quantity demanded 
D) a 300 percent decrease in the quantity demanded

Question 5

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 6

What does the elasticity of demand for luxuries tend to be

Accepted Answer

A) greater than 1 
B) less than 1 
C) equal to 1 
D) equal to 0 
A) greater than 1 
B) less than 1 
C) equal to 1 
D) equal to 0

Question 7

Normal goods have negative income elasticities of demand while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 8

Elasticity of demand is closely related to the slope of the demand curve.What is the slope when demand elasticity is greater

Accepted Answer

A) steeper 
B) further to the right 
C) flatter 
D) closer to the vertical axis 
A) steeper 
B) further to the right 
C) flatter 
D) closer to the vertical axis

Question 9

Table 5-2  
-Refer to Table 5-2.Using the midpoint method,what is the income elasticity of good Y

Accepted Answer

A) -3.33 
B) -2.33 
C) -1.20 
D) 1.33 
A) -3.33 
B) -2.33 
C) -1.20 
D) 1.33

Question 10

What impact does an increase in farm technology that increases market supply have for farmers and for consumers

Accepted Answer

A) It is good for farmers because it raises prices for their products, but it is bad for consumers because it raises the prices consumers pay for food. 
B) It is bad for farmers because total revenue will fall, but it is good for consumers because food prices will fall. 
C) It is good for farmers because it raises prices for their products, and it is also good for consumers because more output is available for consumption. 
D) It is bad for farmers because total revenue will fall, and it is bad for consumers because farmers will raise the price of food to increase their total revenue. 
A) It is good for farmers because it raises prices for their products, but it is bad for consumers because it raises the prices consumers pay for food. 
B) It is bad for farmers because total revenue will fall, but it is good for consumers because food prices will fall. 
C) It is good for farmers because it raises prices for their products, and it is also good for consumers because more output is available for consumption. 
D) It is bad for farmers because total revenue will fall, and it is bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 11

Use the graph shown to answer the following questions.Put the correct letter in the blank.Letters may be used more than once.
​   
a.The elastic section of the graph is represented by section _______.
b.The inelastic section of the graph is represented by section _______.
c.The unit elastic section of the graph is represented by section _______.
d.The portion of the graph in which a decrease in price would cause total revenue to fall would be _________.
e.The portion of the graph in which a decrease in price would cause total revenue to rise would be _________.
f.The portion of the graph in which a decrease in price would not cause a change in total revenue would be _________.
g.The section of the graph in which total revenue would be at a maximum would be _______.
h.The section of the graph in which elasticity is greater than 1 is _______.
i.The section of the graph in which elasticity is equal to 1 is ______.
j.The section of the graph in which elasticity is less than 1 is _______.​

Accepted Answer

a. A       
b. C

Question 12

Why does Werther's Original candy tend to have an elastic demand

Accepted Answer

A) because the candy market is too broadly defined 
B) because there are many close substitutes for Werther's 
C) because Werther's Original candy is considered by some to be a necessity 
D) because it is usually eaten quickly and therefore the time horizon is short 
A) because the candy market is too broadly defined 
B) because there are many close substitutes for Werther's 
C) because Werther's Original candy is considered by some to be a necessity 
D) because it is usually eaten quickly and therefore the time horizon is short

Question 13

Company E,Canada's largest eBook company,wants to increase its total revenue.One strategy is to offer a 10 percent discount on every eBook it sells.Company E knows that its customers can be divided into two distinct groups according to their likely responses to the discount.The accompanying table shows how the two groups respond to the discount.
​   
a.Using the midpoint method, calculate the price elasticities of demand for group I and group II.
b.Explain how the discount will affect total revenue from each group.
c.Suppose Company E knows which group each customer belongs to when he logs on and can choose whether or not to offer the discount.If Company E wants to increase its total revenue, should discounts be offered to group I or to group II, to neither group, or to both groups?

Accepted Answer

a.Percentage change in quantity for grou

Question 14

If a good is a necessity,what would demand for the good tend to be

Accepted Answer

A) elastic 
B) horizontal 
C) unit elastic 
D) inelastic 
A) elastic 
B) horizontal 
C) unit elastic 
D) inelastic

Question 15

The flatter the demand curve that passes through a given point,the more inelastic the demand.

Accepted Answer

A) True 
 B)False

Question 16

Brenna's income elasticity of demand for football tickets is 1.5.All else equal,if her income increases by 18 percent,how many more football tickets will she buy

Accepted Answer

A) 18 percent more football tickets 
B) 27 percent more football tickets 
C) 46 percent more football tickets 
D) 150 percent more football tickets 
A) 18 percent more football tickets 
B) 27 percent more football tickets 
C) 46 percent more football tickets 
D) 150 percent more football tickets

Question 17

When demand is inelastic,a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 18

According to a Ford press release in April 2013,sales of the fuel-efficient four-cylinder Ford Fusion rose by 4 percent in the first quarter.Over the same period,according to data from National Resources Canada,the average price of regular gasoline rose from 118.9 cents per litre to 129.4 cents per litre.Using the midpoint method,calculate the cross-price elasticity of demand between the Ford Fusion and regular gasoline.According to your estimate of the cross-price elasticity,are the two goods gross complements or gross substitutes
 Does your answer make sense

Accepted Answer

Cross elasticity is equal to 0.5.Since t

Question 19

Figure 5-7
  
-Refer to Figure 5-7.What areas represent the total revenue at P₁

Accepted Answer

A) A + B 
B) A + C 
C) B + D 
D) C + D 
A) A + B 
B) A + C 
C) B + D 
D) C + D

Question 20

As the price elasticity of demand increases,what happens to the slope of the linear demand curve

Accepted Answer

A) The price elasticity of demand will be closer to the slope of the curve. 
B) The demand curve will be flatter through a given point. 
C) The price elasticity of demand will be further from the slope of the curve. 
D) The demand curve will be steeper through a given point. 
A) The price elasticity of demand will be closer to the slope of the curve. 
B) The demand curve will be flatter through a given point. 
C) The price elasticity of demand will be further from the slope of the curve. 
D) The demand curve will be steeper through a given point.

Necessities tend to have price inelastic demands,whereas luxuries have price elastic demands.

When her income increased from $30,000 to $40,000,Toby's consumption of macaroni decreased from 8 kilograms to 6 kilograms and her consumption of soy burgers increased from 3 kilograms to 4 kilograms.What can we conclude for Toby

Which of the following statements applies to a perfectly elastic supply curve

If the price elasticity of demand for a good is 3.0,what would result from a 10 percent increase in price

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

What does the elasticity of demand for luxuries tend to be

Normal goods have negative income elasticities of demand while inferior goods have positive income elasticities of demand.

Elasticity of demand is closely related to the slope of the demand curve.What is the slope when demand elasticity is greater

Table 5-2 -Refer to Table 5-2.Using the midpoint method,what is the income elasticity of good Y

What impact does an increase in farm technology that increases market supply have for farmers and for consumers

Why does Werther's Original candy tend to have an elastic demand

If a good is a necessity,what would demand for the good tend to be

The flatter the demand curve that passes through a given point,the more inelastic the demand.

Brenna's income elasticity of demand for football tickets is 1.5.All else equal,if her income increases by 18 percent,how many more football tickets will she buy

When demand is inelastic,a decrease in price increases total revenue.

Figure 5-7 -Refer to Figure 5-7.What areas represent the total revenue at P₁

As the price elasticity of demand increases,what happens to the slope of the linear demand curve

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Exam 5: Elasticity and Its Application

Necessities tend to have price inelastic demands,whereas luxuries have price elastic demands.

When her income increased from $30,000 to $40,000,Toby's consumption of macaroni decreased from 8 kilograms to 6 kilograms and her consumption of soy burgers increased from 3 kilograms to 4 kilograms.What can we conclude for Toby

Which of the following statements applies to a perfectly elastic supply curve

If the price elasticity of demand for a good is 3.0,what would result from a 10 percent increase in price

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

What does the elasticity of demand for luxuries tend to be

Normal goods have negative income elasticities of demand while inferior goods have positive income elasticities of demand.

Elasticity of demand is closely related to the slope of the demand curve.What is the slope when demand elasticity is greater

Table 5-2 -Refer to Table 5-2.Using the midpoint method,what is the income elasticity of good Y

What impact does an increase in farm technology that increases market supply have for farmers and for consumers

Why does Werther's Original candy tend to have an elastic demand

If a good is a necessity,what would demand for the good tend to be

The flatter the demand curve that passes through a given point,the more inelastic the demand.

Brenna's income elasticity of demand for football tickets is 1.5.All else equal,if her income increases by 18 percent,how many more football tickets will she buy

When demand is inelastic,a decrease in price increases total revenue.

Figure 5-7 -Refer to Figure 5-7.What areas represent the total revenue at P₁

As the price elasticity of demand increases,what happens to the slope of the linear demand curve

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters