Question 1

If a 4 percent decrease in income (at a constant price)results in a 2 percent decrease in the consumption of dweedles then

Accepted Answer

A) the income elasticity of demand for dweedles is negative. 
B) dweedles are a necessity and a normal good. 
C) dweedles are a luxury and a normal good. 
D) dweedles are an inferior good. 
E) the price elasticity of demand for dweedles is negative. 
A) the income elasticity of demand for dweedles is negative. 
B) dweedles are a necessity and a normal good. 
C) dweedles are a luxury and a normal good. 
D) dweedles are an inferior good. 
E) the price elasticity of demand for dweedles is negative.

Question 2

The price elasticity of demand depends on

Accepted Answer

A) the units used to measure price and the units used to measure quantity. 
B) the units used to measure price but not the units used to measure quantity. 
C) the units used to measure quantity but not the units used to measure price. 
D) neither the units used to measure price nor the units used to measure quantity. 
E) the relative price of the good. 
A) the units used to measure price and the units used to measure quantity. 
B) the units used to measure price but not the units used to measure quantity. 
C) the units used to measure quantity but not the units used to measure price. 
D) neither the units used to measure price nor the units used to measure quantity. 
E) the relative price of the good.

Question 3

If the demand curve for a good is a horizontal line, then the good has

Accepted Answer

A) zero income elasticity. 
B) price elasticity of demand equal to zero. 
C) infinite price elasticity of demand. 
D) a price elasticity of demand that is likely to rise in the short run. 
E) a price elasticity of demand that is likely to fall in the short run. 
A) zero income elasticity. 
B) price elasticity of demand equal to zero. 
C) infinite price elasticity of demand. 
D) a price elasticity of demand that is likely to rise in the short run. 
E) a price elasticity of demand that is likely to fall in the short run.

Question 4

If a large percentage fall in the price of good A results in a small percentage decrease in the quantity supplied, then

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) demand is income inelastic. 
D) supply is inelastic. 
E) supply is elastic. 
A) demand is elastic. 
B) demand is inelastic. 
C) demand is income inelastic. 
D) supply is inelastic. 
E) supply is elastic.

Question 5

For which one of the following is demand likely to be most inelastic?

Accepted Answer

A) diamonds 
B) insulin for a diabetic 
C) potatoes 
D) gasoline 
E) books 
A) diamonds 
B) insulin for a diabetic 
C) potatoes 
D) gasoline 
E) books

Question 6

Which of the following will have the most elastic demand?

Accepted Answer

A) frozen desserts 
B) ice cream 
C) strawberry ice cream 
D) a banana split made with strawberry and chocolate ice cream 
E) a banana split with Nestle strawberry and chocolate ice cream 
A) frozen desserts 
B) ice cream 
C) strawberry ice cream 
D) a banana split made with strawberry and chocolate ice cream 
E) a banana split with Nestle strawberry and chocolate ice cream

Question 7

If the price elasticity of demand for peaches is 1.76 and the price elasticity of demand for apples is 1.59, then consumers are

Accepted Answer

A) more sensitive to a change in the price of apples than they are to a change in the price of peaches. 
B) more sensitive to a change in the price of peaches than they are to a change in the price of apples. 
C) more likely to substitute strawberries for peaches than for apples. 
D) more likely to substitute strawberries for apples than for peaches. 
E) eating more peaches than apples. 
A) more sensitive to a change in the price of apples than they are to a change in the price of peaches. 
B) more sensitive to a change in the price of peaches than they are to a change in the price of apples. 
C) more likely to substitute strawberries for peaches than for apples. 
D) more likely to substitute strawberries for apples than for peaches. 
E) eating more peaches than apples.

Question 8

If the demand for a good is unit elastic, then a 5 percent increase in price results in

Accepted Answer

A) a 5 percent increase in total revenue. 
B) a 5 percent decrease in total revenue. 
C) no change in total revenue. 
D) an increase in total revenue greater than 5 percent. 
E) an increase in total revenue less than 5 percent. 
A) a 5 percent increase in total revenue. 
B) a 5 percent decrease in total revenue. 
C) no change in total revenue. 
D) an increase in total revenue greater than 5 percent. 
E) an increase in total revenue less than 5 percent.

Question 9

The demand for a good is price inelastic if

Accepted Answer

A) a rise in price results in an increase in total revenue. 
B) a rise in price results in a decrease in total revenue. 
C) an increase in income results in a decrease in total revenue. 
D) an increase in income results in an increase in total revenue. 
E) the good is a luxury. 
A) a rise in price results in an increase in total revenue. 
B) a rise in price results in a decrease in total revenue. 
C) an increase in income results in a decrease in total revenue. 
D) an increase in income results in an increase in total revenue. 
E) the good is a luxury.

Question 10

Fred's income increases from $1,950 per week to $2,050 per week. As a result, he decides to increase the number of movies he attends each month by 10 percent. Fred's demand for movies is

Accepted Answer

A) price elastic. 
B) price inelastic. 
C) income elastic. 
D) income inelastic. 
E) income inferior. 
A) price elastic. 
B) price inelastic. 
C) income elastic. 
D) income inelastic. 
E) income inferior.

Question 11

Suppose the government of Nova Scotia wants to reduce the consumption of electricity by 5 percent. The price elasticity of demand for electricity is 0.40. You advise the Nova Scotia government to

Accepted Answer

A) raise the price of electricity by 12.5 percent. 
B) raise the price of electricity by 2 percent. 
C) lower the price of electricity by 12.5 percent. 
D) stay away from the market for electricity and let the market mechanism fix the problem. 
E) lower the price of electricity by 2 percent. 
A) raise the price of electricity by 12.5 percent. 
B) raise the price of electricity by 2 percent. 
C) lower the price of electricity by 12.5 percent. 
D) stay away from the market for electricity and let the market mechanism fix the problem. 
E) lower the price of electricity by 2 percent.

Question 12

Demand will be more elastic the

Accepted Answer

A) higher the income level. 
B) lower the income level. 
C) longer the passage of time after a price increase. 
D) fewer substitutes are available. 
E) smaller the fraction of income spent on the good. 
A) higher the income level. 
B) lower the income level. 
C) longer the passage of time after a price increase. 
D) fewer substitutes are available. 
E) smaller the fraction of income spent on the good.

Question 13

If a 10 percent increase in price results in an 18 percent increase in quantity supplied, the elasticity of supply is

Accepted Answer

A) 0.3. 
B) 0.6. 
C) 1.2. 
D) 1.8. 
E) 9.0. 
A) 0.3. 
B) 0.6. 
C) 1.2. 
D) 1.8. 
E) 9.0.

Question 14

The price of gasoline rises by 25 percent and remains fixed at the new higher level. Choose the correct statement.

Accepted Answer

A) The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price. 
B) The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price. 
C) Initially after the price change, the price elasticity of demand will be less elastic than it will be a few years after the price change. 
D) The price elasticity of demand for gasoline will decrease in the future. 
E) Initially after the price change, the price elasticity of demand will be more elastic than it will be a few years after the price change. 
A) The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price. 
B) The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price. 
C) Initially after the price change, the price elasticity of demand will be less elastic than it will be a few years after the price change. 
D) The price elasticity of demand for gasoline will decrease in the future. 
E) Initially after the price change, the price elasticity of demand will be more elastic than it will be a few years after the price change.

Question 15

A negative value for

Accepted Answer

A) price elasticity of supply implies an upward-sloping supply curve. 
B) cross elasticity of demand implies that the goods are complements. 
C) price elasticity of demand implies an inferior good. 
D) income elasticity of demand implies a normal good. 
E) income elasticity of demand implies an error in your calculation. 
A) price elasticity of supply implies an upward-sloping supply curve. 
B) cross elasticity of demand implies that the goods are complements. 
C) price elasticity of demand implies an inferior good. 
D) income elasticity of demand implies a normal good. 
E) income elasticity of demand implies an error in your calculation.

Question 16

The demand for corn increases. As a result, the price of corn ________, and the less elastic the supply of corn, the ________ will be the effect on the price.

Accepted Answer

A) falls; smaller 
B) falls; greater 
C) rises; smaller 
D) rises; greater 
E) does not change; smaller 
A) falls; smaller 
B) falls; greater 
C) rises; smaller 
D) rises; greater 
E) does not change; smaller

Question 17

Suppose a rise in the price of a good from $6.50 to $7.50 leads to a decrease in the quantity demanded from 10,500 to 9,500 units. In this range of demand, the price elasticity of demand is

Accepted Answer

A) 14. 
B) 7. 
C) 1,000. 
D) 1. 
E) 0.7. 
A) 14. 
B) 7. 
C) 1,000. 
D) 1. 
E) 0.7.

Question 18

If a 10 percent increase in price results in a 9 percent increase in quantity supplied,

Accepted Answer

A) the good is a normal good. 
B) the good is an inferior good. 
C) supply is unit elastic. 
D) supply is inelastic. 
E) supply is elastic. 
A) the good is a normal good. 
B) the good is an inferior good. 
C) supply is unit elastic. 
D) supply is inelastic. 
E) supply is elastic.

Question 19

Suppose your annual income is $65 000 and your favourite magazine costs you $28 a year. Your demand for the magazine is likely to be

Accepted Answer

A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
E) elastic - the same as your demand for all other goods. 
A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
E) elastic - the same as your demand for all other goods.

Question 20

There is an increase in the price of broccoli because of the disastrous weather that destroyed half of this year's spinach crop. Choose the statement that is correct.

Accepted Answer

A) The demand curve for broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is positive. 
B) The demand curve for broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is negative. 
C) The supply curve of broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is positive. 
D) The supply curve of broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is negative. 
E) The demand curve for broccoli shifted leftward and the cross elasticity of demand for broccoli with respect to the price of spinach is negative. 
A) The demand curve for broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is positive. 
B) The demand curve for broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is negative. 
C) The supply curve of broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is positive. 
D) The supply curve of broccoli shifted rightward and the cross elasticity of demand for broccoli with respect to the price of spinach is negative. 
E) The demand curve for broccoli shifted leftward and the cross elasticity of demand for broccoli with respect to the price of spinach is negative.

Exam 4: Elasticity

If a 4 percent decrease in income (at a constant price)results in a 2 percent decrease in the consumption of dweedles then

The price elasticity of demand depends on

If the demand curve for a good is a horizontal line, then the good has

If a large percentage fall in the price of good A results in a small percentage decrease in the quantity supplied, then

For which one of the following is demand likely to be most inelastic?

Which of the following will have the most elastic demand?

If the price elasticity of demand for peaches is 1.76 and the price elasticity of demand for apples is 1.59, then consumers are

If the demand for a good is unit elastic, then a 5 percent increase in price results in

The demand for a good is price inelastic if

Fred's income increases from $1,950 per week to $2,050 per week. As a result, he decides to increase the number of movies he attends each month by 10 percent. Fred's demand for movies is

Suppose the government of Nova Scotia wants to reduce the consumption of electricity by 5 percent. The price elasticity of demand for electricity is 0.40. You advise the Nova Scotia government to

Demand will be more elastic the

If a 10 percent increase in price results in an 18 percent increase in quantity supplied, the elasticity of supply is

The price of gasoline rises by 25 percent and remains fixed at the new higher level. Choose the correct statement.

A negative value for

The demand for corn increases. As a result, the price of corn ________, and the less elastic the supply of corn, the ________ will be the effect on the price.

Suppose a rise in the price of a good from $6.50 to $7.50 leads to a decrease in the quantity demanded from 10,500 to 9,500 units. In this range of demand, the price elasticity of demand is

If a 10 percent increase in price results in a 9 percent increase in quantity supplied,

Suppose your annual income is $65 000 and your favourite magazine costs you $28 a year. Your demand for the magazine is likely to be

There is an increase in the price of broccoli because of the disastrous weather that destroyed half of this year's spinach crop. Choose the statement that is correct.

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters

The demand for corn increases. As a result, the price of corn , and the less elastic the supply of corn, the will be the effect on the price.