Question 1

The demand for a good is inelastic with respect to price if the price elasticity of demand is:

Accepted Answer

A) equal to one. 
B) greater than one. 
C) less than one. 
D) equal to negative one. 
A) equal to one. 
B) greater than one. 
C) less than one. 
D) equal to negative one.

Question 2

Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the accompanying graph. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph.   If the manufacturer of the new drug chose to increase its price from $70 to $75, consumers would buy ________ doses, and have ________ total expenditures.

Accepted Answer

A) more; higher 
B) fewer; lower 
C) more; lower 
D) fewer; higher 
A) more; higher 
B) fewer; lower 
C) more; lower 
D) fewer; higher

Question 3

If the cross-price elasticity of demand between lettuce and salad dressing is negative, then when the price of lettuce rises, the demand for salad dressing will ________.

Accepted Answer

A) increase 
B) decrease 
C) remain the same 
D) become more inelastic 
A) increase 
B) decrease 
C) remain the same 
D) become more inelastic

Question 4

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:

Accepted Answer

A) 0. 
B) 1. 
C) infinity. 
D) the quantity. 
A) 0. 
B) 1. 
C) infinity. 
D) the quantity.

Question 5

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. If they then still sell almost the same number of sodas per day, this suggests:

Accepted Answer

A) students do not have good nutritional information. 
B) soda purchases represent a large fraction of students' budgets. 
C) there are few other places to purchase soda on campus. 
D) the price elasticity of demand for soda is equal to 1. 
A) students do not have good nutritional information. 
B) soda purchases represent a large fraction of students' budgets. 
C) there are few other places to purchase soda on campus. 
D) the price elasticity of demand for soda is equal to 1.

Question 6

The percentage change in quantity demanded that results from a 1 percent change in price is known as the:

Accepted Answer

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

Question 7

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be ________ the flatter curve.

Accepted Answer

A) more elastic than 
B) less elastic than 
C) as elastic as 
D) more likely to be unit elastic than 
A) more elastic than 
B) less elastic than 
C) as elastic as 
D) more likely to be unit elastic than

Question 8

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:

Accepted Answer

A) substitutes. 
B) normal goods. 
C) complements. 
D) inferior goods. 
A) substitutes. 
B) normal goods. 
C) complements. 
D) inferior goods.

Question 9

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

Accepted Answer

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

Question 10

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. They then notice that they are selling approximately 15 percent fewer sodas. The price elasticity of demand for sodas from the campus vending machines, therefore, is:

Accepted Answer

A) inelastic. 
B) unit elastic. 
C) elastic. 
D) infinite. 
A) inelastic. 
B) unit elastic. 
C) elastic. 
D) infinite.

Question 11

If the cross-price elasticity of demand between two goods is -1.2, then the two goods are:

Accepted Answer

A) inferior. 
B) elastically demanded. 
C) complements. 
D) substitutes. 
A) inferior. 
B) elastically demanded. 
C) complements. 
D) substitutes.

Question 12

Refer to the accompanying figure. What is the price elasticity of supply at point B and point C?

Accepted Answer

A) 1/2; 3/4 
B) 3/4; 1/2 
C) 3; 2 
D) 1; 1 
A) 1/2; 3/4 
B) 3/4; 1/2 
C) 3; 2 
D) 1; 1

Question 13

The demand for a good is elastic if the price elasticity of demand is:

Accepted Answer

A) equal to one. 
B) greater than one. 
C) less than one. 
D) equal to zero. 
A) equal to one. 
B) greater than one. 
C) less than one. 
D) equal to zero.

Question 14

The price elasticity of demand equals 1:

Accepted Answer

A) whenever the slope of a straight-line demand curve is greater than 1 in absolute value. 
B) at the midpoint of a straight-line demand curve. 
C) whenever the slope of a straight-line demand curve is less than 1 in absolute value. 
D) whenever the slope of a straight-line demand curve equals zero. 
A) whenever the slope of a straight-line demand curve is greater than 1 in absolute value. 
B) at the midpoint of a straight-line demand curve. 
C) whenever the slope of a straight-line demand curve is less than 1 in absolute value. 
D) whenever the slope of a straight-line demand curve equals zero.

Question 15

All else equal, compared to small-budget items such as paper towels, the price elasticity of demand for big-ticket items such as refrigerators is:

Accepted Answer

A) higher. 
B) lower. 
C) very low. 
D) equal. 
A) higher. 
B) lower. 
C) very low. 
D) equal.

Question 16

If the demand curve for a good is a vertical line at Q = 1, then a decrease in the price of that good will:

Accepted Answer

A) decrease the quantity demanded. 
B) increase the quantity demanded. 
C) lead the quantity demanded to fall to zero. 
D) not change the quantity demanded. 
A) decrease the quantity demanded. 
B) increase the quantity demanded. 
C) lead the quantity demanded to fall to zero. 
D) not change the quantity demanded.

Question 17

If the income elasticity for a particular good is negative, then:

Accepted Answer

A) the good is a normal good. 
B) as income increases, consumers will tend to purchase more of the good. 
C) as income increases, consumers will tend to purchase less of the good. 
D) the good is a luxury good. 
A) the good is a normal good. 
B) as income increases, consumers will tend to purchase more of the good. 
C) as income increases, consumers will tend to purchase less of the good. 
D) the good is a luxury good.

Question 18

All else equal, the price elasticity of demand tends to be higher when:

Accepted Answer

A) a good has many substitutes. 
B) the time horizon is relatively short. 
C) people spend a small fraction of their budget on the good. 
D) supply increases. 
A) a good has many substitutes. 
B) the time horizon is relatively short. 
C) people spend a small fraction of their budget on the good. 
D) supply increases.

Question 19

The price elasticity of demand is typically expressed as a positive number because:

Accepted Answer

A) price and quantity move in the same direction. 
B) the demand curve has a positive slope. 
C) it's convenient to use absolute values. 
D) both the numerator and the denominator are negative, so the formula yields a positive number. 
A) price and quantity move in the same direction. 
B) the demand curve has a positive slope. 
C) it's convenient to use absolute values. 
D) both the numerator and the denominator are negative, so the formula yields a positive number.

Question 20

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:

Accepted Answer

A) increase by 0.33 percent. 
B) decrease by 0.33 percent. 
C) increase by 3 percent. 
D) decrease by 3 percent. 
A) increase by 0.33 percent. 
B) decrease by 0.33 percent. 
C) increase by 3 percent. 
D) decrease by 3 percent.

Exam 4: Elasticity

The demand for a good is inelastic with respect to price if the price elasticity of demand is:

If the cross-price elasticity of demand between lettuce and salad dressing is negative, then when the price of lettuce rises, the demand for salad dressing will ________.

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. If they then still sell almost the same number of sodas per day, this suggests:

The percentage change in quantity demanded that results from a 1 percent change in price is known as the:

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be ________ the flatter curve.

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. They then notice that they are selling approximately 15 percent fewer sodas. The price elasticity of demand for sodas from the campus vending machines, therefore, is:

If the cross-price elasticity of demand between two goods is -1.2, then the two goods are:

Refer to the accompanying figure. What is the price elasticity of supply at point B and point C?

The demand for a good is elastic if the price elasticity of demand is:

The price elasticity of demand equals 1:

All else equal, compared to small-budget items such as paper towels, the price elasticity of demand for big-ticket items such as refrigerators is:

If the demand curve for a good is a vertical line at Q = 1, then a decrease in the price of that good will:

If the income elasticity for a particular good is negative, then:

All else equal, the price elasticity of demand tends to be higher when:

The price elasticity of demand is typically expressed as a positive number because:

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

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