Question 1

A sudden, end-of-summer heat wave increases the demand for air conditioners and catches suppliers with no reserve inventories. The momentary supply for air conditioners is

Accepted Answer

A) perfectly elastic. 
B) perfectly inelastic. 
C) elastic. 
D) shown by an upward-sloping curve. 
E) shown by a horizontal curve. 
A) perfectly elastic. 
B) perfectly inelastic. 
C) elastic. 
D) shown by an upward-sloping curve. 
E) shown by a horizontal curve.

Question 2

A fall in the price of X from $6 to $4 results in an increase in the quantity of Y demanded (at the current price of Y)from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?

Accepted Answer

A) 0.5 
B) -0.5 
C) 2 
D) -2 
E) Either A or B, depending on whether X and Y are substitutes or complements. 
A) 0.5 
B) -0.5 
C) 2 
D) -2 
E) Either A or B, depending on whether X and Y are substitutes or complements.

Question 3

Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from students. This policy works only if the demand for a Simon Fraser University education is

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) greater than the demand for a University of Western Ontario education. 
E) perfectly elastic. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) greater than the demand for a University of Western Ontario education. 
E) perfectly elastic.

Question 4

Suppose the price of a television set rises by 10 percent. Which one of the following would we expect to be the most elastic following such a price change?

Accepted Answer

A) the momentary supply of television sets 
B) the short-run supply of television sets 
C) the long-run supply of television sets 
D) the momentary demand for television sets 
E) the normal demand for television sets 
A) the momentary supply of television sets 
B) the short-run supply of television sets 
C) the long-run supply of television sets 
D) the momentary demand for television sets 
E) the normal demand for television sets

Question 5

If a rise in the price of good A from $100 to $120 results in an increase in quantity supplied from 10,000 to 12,000 units, then the elasticity of supply is

Accepted Answer

A) 0.625. 
B) 0.8. 
C) 1.25. 
D) 0.2. 
E) 1.0. 
A) 0.625. 
B) 0.8. 
C) 1.25. 
D) 0.2. 
E) 1.0.

Question 6

The price elasticity of demand for airplane travel one week in advance of the departure date is most likely to be

Accepted Answer

A) equal to infinity. 
B) equal to zero. 
C) between zero and 1. 
D) equal to 1. 
E) greater than 1. 
A) equal to infinity. 
B) equal to zero. 
C) between zero and 1. 
D) equal to 1. 
E) greater than 1.

Question 7

Business people speak about income elasticity of demand without using the actual term. Which one of the following statements reflects income elasticity of demand?

Accepted Answer

A) "A price cut won't help me. It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line. What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters. Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) "Since the price of gasoline fell at the neighbouring station, my milk sales have been booming." 
A) "A price cut won't help me. It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line. What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters. Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) "Since the price of gasoline fell at the neighbouring station, my milk sales have been booming."

Question 8

If a rise in the price of good A from $9 to $11 results in an increase in quantity supplied from 4,000 to 6,000 units, the elasticity of supply is

Accepted Answer

A) 0.5. 
B) 0.8. 
C) 1.0. 
D) 2.0. 
E) 20.0. 
A) 0.5. 
B) 0.8. 
C) 1.0. 
D) 2.0. 
E) 20.0.

Question 9

If the price elasticity of demand is zero, then demand is

Accepted Answer

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

Question 10

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a

Accepted Answer

A) 2 percent decrease in quantity demanded. 
B) 20 percent decrease in quantity demanded. 
C) 5 percent decrease in quantity demanded. 
D) 2 percent increase in quantity demanded. 
E) 20 percent increase in quantity demanded. 
A) 2 percent decrease in quantity demanded. 
B) 20 percent decrease in quantity demanded. 
C) 5 percent decrease in quantity demanded. 
D) 2 percent increase in quantity demanded. 
E) 20 percent increase in quantity demanded.

Question 11

At a price of $15, Jack's quantity demanded of good A is the same as when the price rises to $16. Jack's demand for good A is

Accepted Answer

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

Question 12

Total revenue from the sale of a good will decrease if

Accepted Answer

A) income increases and the good is a normal good. 
B) its price rises and demand is elastic. 
C) its price rises and demand is inelastic. 
D) income falls and the good is an inferior good. 
E) its price falls and demand is elastic. 
A) income increases and the good is a normal good. 
B) its price rises and demand is elastic. 
C) its price rises and demand is inelastic. 
D) income falls and the good is an inferior good. 
E) its price falls and demand is elastic.

Question 13

If good A is a substitute for good B, then the cross elasticity of demand is

Accepted Answer

A) 12. 
B) infinity. 
C) positive. 
D) zero. 
E) less than zero. 
A) 12. 
B) infinity. 
C) positive. 
D) zero. 
E) less than zero.

Question 14

A given percentage rise in the price of a good is likely to result in a larger percentage decrease in the quantity of the good demanded

Accepted Answer

A) the shorter the passage of time. 
B) the larger the proportion of income spent on it. 
C) the harder it is to obtain good substitutes. 
D) all of the above 
E) none of the above 
A) the shorter the passage of time. 
B) the larger the proportion of income spent on it. 
C) the harder it is to obtain good substitutes. 
D) all of the above 
E) none of the above

Question 15

Which one of the following must be true if demand is income elastic?

Accepted Answer

A) A large percentage increase in income will result in a small percentage increase in quantity demanded. 
B) A small percentage increase in income will result in a large percentage increase in quantity demanded. 
C) An increase in income will decrease the quantity demanded. 
D) The good is an inferior good. 
E) A percentage change in price will lead to a larger percentage change in quantity demanded. 
A) A large percentage increase in income will result in a small percentage increase in quantity demanded. 
B) A small percentage increase in income will result in a large percentage increase in quantity demanded. 
C) An increase in income will decrease the quantity demanded. 
D) The good is an inferior good. 
E) A percentage change in price will lead to a larger percentage change in quantity demanded.

Question 16

In 2003, when music downloading first took off, Universal Music slashed the average price of a CD from $21 to $15. The company expected the price cut to boost the quantity of CDs sold by 30 percent, other things remaining the same. If you are making the pricing decision at Universal Music, what would you do?

Accepted Answer

A) lower the price because demand is inelastic 
B) raise the price because demand is elastic 
C) raise the price because demand is inelastic 
D) lower the price because demand is elastic 
E) not change the price because demand is unit elastic 
A) lower the price because demand is inelastic 
B) raise the price because demand is elastic 
C) raise the price because demand is inelastic 
D) lower the price because demand is elastic 
E) not change the price because demand is unit elastic

Question 17

In the market for farm crops momentary supply is ________. In the market for farm crops, short-run supply is ________.

Accepted Answer

A) less elastic than short-run supply; less elastic than long-run supply 
B) more elastic than short-run supply; more elastic than long-run supply 
C) negative; positive 
D) positive; negative 
E) perfectly elastic; perfectly inelastic 
A) less elastic than short-run supply; less elastic than long-run supply 
B) more elastic than short-run supply; more elastic than long-run supply 
C) negative; positive 
D) positive; negative 
E) perfectly elastic; perfectly inelastic

Question 18

A rise in the price of good A shifts the

Accepted Answer

A) demand curve for good B rightward if the cross elasticity of demand between A and B is negative. 
B) demand curve for good B rightward if the cross elasticity of demand between A and B is positive. 
C) supply curve of B rightward if the cross elasticity of demand between A and B is negative. 
D) supply curve of B rightward if the cross elasticity of demand between A and B is positive. 
E) demand curve for B rightward if the income elasticity of demand for B is positive. 
A) demand curve for good B rightward if the cross elasticity of demand between A and B is negative. 
B) demand curve for good B rightward if the cross elasticity of demand between A and B is positive. 
C) supply curve of B rightward if the cross elasticity of demand between A and B is negative. 
D) supply curve of B rightward if the cross elasticity of demand between A and B is positive. 
E) demand curve for B rightward if the income elasticity of demand for B is positive.

Question 19

Suppose that the price elasticity of demand for bottled water in Sackville, New Brunswick is 1.5, while the price elasticity of demand for bottled water in Prince Albert, Saskatchewan is 0.93. This implies that the demand in Sackville is ________ and demand in Prince Albert is ________.

Accepted Answer

A) unit elastic; unit elastic 
B) perfectly elastic; inelastic 
C) inelastic; elastic 
D) elastic; inelastic 
E) elastic; unit elastic 
A) unit elastic; unit elastic 
B) perfectly elastic; inelastic 
C) inelastic; elastic 
D) elastic; inelastic 
E) elastic; unit elastic

Question 20

If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A) 0.8. 
B) 1.25. 
C) 8. 
D) 0.125. 
E) 80. 
A) 0.8. 
B) 1.25. 
C) 8. 
D) 0.125. 
E) 80.

Exam 4: Elasticity

A sudden, end-of-summer heat wave increases the demand for air conditioners and catches suppliers with no reserve inventories. The momentary supply for air conditioners is

A fall in the price of X from $6 to $4 results in an increase in the quantity of Y demanded (at the current price of Y)from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?

Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from students. This policy works only if the demand for a Simon Fraser University education is

Suppose the price of a television set rises by 10 percent. Which one of the following would we expect to be the most elastic following such a price change?

If a rise in the price of good A from $100 to $120 results in an increase in quantity supplied from 10,000 to 12,000 units, then the elasticity of supply is

The price elasticity of demand for airplane travel one week in advance of the departure date is most likely to be

Business people speak about income elasticity of demand without using the actual term. Which one of the following statements reflects income elasticity of demand?

If a rise in the price of good A from $9 to $11 results in an increase in quantity supplied from 4,000 to 6,000 units, the elasticity of supply is

If the price elasticity of demand is zero, then demand is

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a

At a price of $15, Jack's quantity demanded of good A is the same as when the price rises to $16. Jack's demand for good A is

Total revenue from the sale of a good will decrease if

If good A is a substitute for good B, then the cross elasticity of demand is

A given percentage rise in the price of a good is likely to result in a larger percentage decrease in the quantity of the good demanded

Which one of the following must be true if demand is income elastic?

In the market for farm crops momentary supply is ________. In the market for farm crops, short-run supply is ________.

A rise in the price of good A shifts the

Suppose that the price elasticity of demand for bottled water in Sackville, New Brunswick is 1.5, while the price elasticity of demand for bottled water in Prince Albert, Saskatchewan is 0.93. This implies that the demand in Sackville is ________ and demand in Prince Albert is ________.

If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded, the price elasticity of demand is

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

In the market for farm crops momentary supply is . In the market for farm crops, short-run supply is .

Suppose that the price elasticity of demand for bottled water in Sackville, New Brunswick is 1.5, while the price elasticity of demand for bottled water in Prince Albert, Saskatchewan is 0.93. This implies that the demand in Sackville is and demand in Prince Albert is .