Question 1

The price elasticity of supply is equal to________.

Accepted Answer

A) the value of the slope of the supply curve. 
B) the change in quantity supplied divided by the change in price. 
C) the percentage change in price divided by the percentage change in quantity supplied. 
D) the percentage change in quantity supplied divided by the percentage change in price. 
A) the value of the slope of the supply curve. 
B) the change in quantity supplied divided by the change in price. 
C) the percentage change in price divided by the percentage change in quantity supplied. 
D) the percentage change in quantity supplied divided by the percentage change in price.

Question 2

What is income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce?

Accepted Answer

A) -0.66 
B) 0)5 
C) 1)5 
D) 2 
A) -0.66 
B) 0)5 
C) 1)5 
D) 2

Question 3

Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets.Based on this information, the demand for Yoshi's jazz performance is elastic.

Accepted Answer

A) True 
 B)False

Question 4

If a firm's goal is to maximise revenue, it will price its product to correspond to the unit-elastic segment of its demand curve.

Accepted Answer

A) True 
 B)False

Question 5

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Accepted Answer

A) The elasticity coefficient is likely to be higher in the long run than in the short run. 
B) The elasticity coefficient is likely to be lower in the long run than in the short run. 
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted. 
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted. 
A) The elasticity coefficient is likely to be higher in the long run than in the short run. 
B) The elasticity coefficient is likely to be lower in the long run than in the short run. 
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted. 
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted.

Question 6

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula, what is the price elasticity of demand (in absolute value)over this range?

Accepted Answer

A) 0)003 
B) 0)41 
C) 2)43 
D) 4 
A) 0)003 
B) 0)41 
C) 2)43 
D) 4

Question 7

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

1.Availability of close substitutes: If

Question 8

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Accepted Answer

A) True 
 B)False

Question 9

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 10

The slope of a demand curve is not used to measure the price elasticity of demand because:

Accepted Answer

A) the slope of a linear demand curve is not constant. 
B) the slope of a line cannot have a negative value. 
C) the measurement of slope is sensitive to the units chosen for price and quantity. 
D) the slope of the demand curve does not tell us how much quantity changes as price changes. 
A) the slope of a linear demand curve is not constant. 
B) the slope of a line cannot have a negative value. 
C) the measurement of slope is sensitive to the units chosen for price and quantity. 
D) the slope of the demand curve does not tell us how much quantity changes as price changes.

Question 11

If demand is perfectly inelastic, what is the absolute value of the price elasticity of demand?

Accepted Answer

A) Zero 
B) Less than one 
C) More than one 
D) Equal to the absolute value of the slope of the demand curve 
A) Zero 
B) Less than one 
C) More than one 
D) Equal to the absolute value of the slope of the demand curve

Question 12

If a 5 per cent increase in income leads to a 10 per cent increase in quantity demanded for airline travel, then airline travel is:

Accepted Answer

A) a necessity. 
B) a substitute for another good. 
C) a luxury. 
D) an inferior good. 
A) a necessity. 
B) a substitute for another good. 
C) a luxury. 
D) an inferior good.

Question 13

Suppose a 4 per cent increase in income results in a 2 per cent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Income elasticity of

Question 14

Which statement is true of the market for a product is broadly defined?

Accepted Answer

A) The good has many complements. 
B) There are few substitutes for the product, and the demand for the product is relatively inelastic. 
C) There are many substitutes for the product, and the demand for the product is relatively elastic. 
D) The expenditure on the good is likely to make up a large share of one's budget. 
A) The good has many complements. 
B) There are few substitutes for the product, and the demand for the product is relatively inelastic. 
C) There are many substitutes for the product, and the demand for the product is relatively elastic. 
D) The expenditure on the good is likely to make up a large share of one's budget.

Question 15

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant, this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by:

Accepted Answer

A) 1)5 per cent. 
B) 15 per cent. 
C) approximately 25 per cent. 
D) approximately 5 per cent. 
A) 1)5 per cent. 
B) 15 per cent. 
C) approximately 25 per cent. 
D) approximately 5 per cent.

Question 16

What is the demand for petrol in the short run?

Accepted Answer

A) Elastic because people can easily switch to public transportation 
B) Perfectly inelastic because people have no choice but to buy petrol 
C) Unit-elastic because people tend to consume a stable amount of petrol per period 
D) Inelastic because there are no good substitutes for petrol 
A) Elastic because people can easily switch to public transportation 
B) Perfectly inelastic because people have no choice but to buy petrol 
C) Unit-elastic because people tend to consume a stable amount of petrol per period 
D) Inelastic because there are no good substitutes for petrol

Question 17

If at a price of $24, Octavia sells 36 homegrown orchids and at $30 she sells 24 homegrown orchids, what is the demand for her orchids?

Accepted Answer

A) Elastic 
B) Inelastic 
C) Unit-elastic 
D) Perfectly elastic 
A) Elastic 
B) Inelastic 
C) Unit-elastic 
D) Perfectly elastic

Question 18

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is:

Accepted Answer

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

Question 19

Assume that when the price of cantaloupes is $2.50, the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping.If firms lower the price of cantaloupes to $2.00, which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

Accepted Answer

A) The demand for cantaloupes at $2.00 must be inelastic. 
B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C) The demand for cantaloupes at $2.00 must be elastic. 
D) The demand for cantaloupes at $2.00 must be unit-elastic. 
A) The demand for cantaloupes at $2.00 must be inelastic. 
B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C) The demand for cantaloupes at $2.00 must be elastic. 
D) The demand for cantaloupes at $2.00 must be unit-elastic.

Question 20

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.This means that________.

Accepted Answer

A) a 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption. 
B) a 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption. 
C) if the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D) the demand for orange juice is 6 times more than the demand for grapefruit juice. 
A) a 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption. 
B) a 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption. 
C) if the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D) the demand for orange juice is 6 times more than the demand for grapefruit juice.

The price elasticity of supply is equal to________.

What is income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce?

Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets.Based on this information, the demand for Yoshi's jazz performance is elastic.

If a firm's goal is to maximise revenue, it will price its product to correspond to the unit-elastic segment of its demand curve.

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula, what is the price elasticity of demand (in absolute value)over this range?

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

When there are few substitutes available for a good, demand tends to be relatively inelastic.

The slope of a demand curve is not used to measure the price elasticity of demand because:

If demand is perfectly inelastic, what is the absolute value of the price elasticity of demand?

If a 5 per cent increase in income leads to a 10 per cent increase in quantity demanded for airline travel, then airline travel is:

Which statement is true of the market for a product is broadly defined?

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant, this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by:

What is the demand for petrol in the short run?

If at a price of $24, Octavia sells 36 homegrown orchids and at $30 she sells 24 homegrown orchids, what is the demand for her orchids?

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is:

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.This means that________.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 4: Elasticity: The Responsiveness of Demand and Supply

The price elasticity of supply is equal to________.

What is income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce?

Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets.Based on this information, the demand for Yoshi's jazz performance is elastic.

If a firm's goal is to maximise revenue, it will price its product to correspond to the unit-elastic segment of its demand curve.

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula, what is the price elasticity of demand (in absolute value)over this range?

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

When there are few substitutes available for a good, demand tends to be relatively inelastic.

The slope of a demand curve is not used to measure the price elasticity of demand because:

If demand is perfectly inelastic, what is the absolute value of the price elasticity of demand?

If a 5 per cent increase in income leads to a 10 per cent increase in quantity demanded for airline travel, then airline travel is:

Which statement is true of the market for a product is broadly defined?

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant, this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by:

What is the demand for petrol in the short run?

If at a price of $24, Octavia sells 36 homegrown orchids and at $30 she sells 24 homegrown orchids, what is the demand for her orchids?

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is:

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.This means that________.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters