Question 1

When demand is unit-elastic, a change in price causes total revenue to stay the same because:

Accepted Answer

A) the percentage change in quantity demanded exactly offsets the percentage change in price. 
B) buyers are buying the same quantity. 
C) total revenue never changes with price changes. 
D) the change in profit is offset by the change in production cost. 
A) the percentage change in quantity demanded exactly offsets the percentage change in price. 
B) buyers are buying the same quantity. 
C) total revenue never changes with price changes. 
D) the change in profit is offset by the change in production cost.

Question 2

Briefly explain the economic concept of elasticity.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Elasticity is a measure of how

Question 3

If the absolute value of the price elasticity of demand for DVD moves is 0.8, then what should be the elasticity of demand for the DVD for the movie The Hangover?

Accepted Answer

A) Less then 0.8 in absolute value 
B) Greater than 0.8 in absolute value 
C) Equal to 1 in absolute value 
D) Equal to zero because the DVD of this movie has been out for several years 
A) Less then 0.8 in absolute value 
B) Greater than 0.8 in absolute value 
C) Equal to 1 in absolute value 
D) Equal to zero because the DVD of this movie has been out for several years

Question 4

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Accepted Answer

A) True 
 B)False

Question 5

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic.She argues 'I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor.If I wanted to buy a mystery novel I would have many authors to choose from.Therefore, the demand for mystery novels is more elastic than the demand for my textbook.' Is Jill correct?

Accepted Answer

A) The demand for the textbook is more inelastic, but Jill's reasoning is incorrect.The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B) She is correct. 
C) She is confused.She should have concluded that the textbook has a more elastic demand than a novel. 
D) She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards.Most people pay for novels and other books with cash or by check. 
A) The demand for the textbook is more inelastic, but Jill's reasoning is incorrect.The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B) She is correct. 
C) She is confused.She should have concluded that the textbook has a more elastic demand than a novel. 
D) She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards.Most people pay for novels and other books with cash or by check.

Question 6

Figure 4.1  
-Refer to Figure 4.1 A perfectly elastic demand curve is shown in:

Accepted Answer

A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D. 
A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D.

Question 7

The cross-price elasticity of demand measures the________.

Accepted Answer

A) absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. 
B) percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. 
C) percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D) percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location. 
A) absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. 
B) percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. 
C) percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D) percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location.

Question 8

Where is total revenue the greatest along a downward-sloping, linear demand curve?

Accepted Answer

A) Where demand is normal 
B) Where demand is the most inelastic 
C) Where demand is the most elastic 
D) Where demand is unit-elastic 
A) Where demand is normal 
B) Where demand is the most inelastic 
C) Where demand is the most elastic 
D) Where demand is unit-elastic

Question 9

If the income elasticity for canned food is 0.8, then canned food is an inferior good.

Accepted Answer

A) True 
 B)False

Question 10

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

Accepted Answer

A) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. 
B) The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. 
C) The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. 
D) The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic. 
A) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. 
B) The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. 
C) The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. 
D) The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.

Question 11

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is:

Accepted Answer

A) one that sells an inferior good. 
B) one that sells a necessity good. 
C) one that sells a luxury good. 
D) one that sells a price inelastic good. 
A) one that sells an inferior good. 
B) one that sells a necessity good. 
C) one that sells a luxury good. 
D) one that sells a price inelastic good.

Question 12

What does price elasticity of demand measure?

Accepted Answer

A) How responsive suppliers are to price changes 
B) How responsive sales are to changes in the price of a related good 
C) How responsive quantity demanded is to a change in price 
D) How responsive sales are to a change in buyers' incomes 
A) How responsive suppliers are to price changes 
B) How responsive sales are to changes in the price of a related good 
C) How responsive quantity demanded is to a change in price 
D) How responsive sales are to a change in buyers' incomes

Question 13

If firms do not increase their quantity supplied when price changes, then supply is:

Accepted Answer

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

Question 14

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore:

Accepted Answer

A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value). 
A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 15

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.

Accepted Answer

A) 7)3 per cent 
B) 14.4 per cent 
C) 25.5 per cent 
D) There is insufficient information to answer the question. 
A) 7)3 per cent 
B) 14.4 per cent 
C) 25.5 per cent 
D) There is insufficient information to answer the question.

Question 16

If, when price changes by 35 per cent, the quantity demanded changes by 7 per cent, then the absolute value of the price elasticity of demand is 5.

Accepted Answer

A) True 
 B)False

Question 17

A perfectly elastic demand curve is:

Accepted Answer

A) vertical. 
B) horizontal. 
C) curvilinear. 
D) upward sloping. 
A) vertical. 
B) horizontal. 
C) curvilinear. 
D) upward sloping.

Question 18

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget. 
A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget.

Question 20

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded, then the demand for golf balls is:

Accepted Answer

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

When demand is unit-elastic, a change in price causes total revenue to stay the same because:

Briefly explain the economic concept of elasticity. __________________________________________________________________________________________________________________________________________________________________________________________

If the absolute value of the price elasticity of demand for DVD moves is 0.8, then what should be the elasticity of demand for the DVD for the movie The Hangover?

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Figure 4.1 -Refer to Figure 4.1 A perfectly elastic demand curve is shown in:

The cross-price elasticity of demand measures the________.

Where is total revenue the greatest along a downward-sloping, linear demand curve?

If the income elasticity for canned food is 0.8, then canned food is an inferior good.

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is:

What does price elasticity of demand measure?

If firms do not increase their quantity supplied when price changes, then supply is:

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore:

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.

If, when price changes by 35 per cent, the quantity demanded changes by 7 per cent, then the absolute value of the price elasticity of demand is 5.

A perfectly elastic demand curve is:

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded, then the demand for golf balls is:

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

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Exam 4: Elasticity: The Responsiveness of Demand and Supply

When demand is unit-elastic, a change in price causes total revenue to stay the same because:

Briefly explain the economic concept of elasticity. __________________________________________________________________________________________________________________________________________________________________________________________

If the absolute value of the price elasticity of demand for DVD moves is 0.8, then what should be the elasticity of demand for the DVD for the movie The Hangover?

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Figure 4.1 -Refer to Figure 4.1 A perfectly elastic demand curve is shown in:

The cross-price elasticity of demand measures the________.

Where is total revenue the greatest along a downward-sloping, linear demand curve?

If the income elasticity for canned food is 0.8, then canned food is an inferior good.

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is:

What does price elasticity of demand measure?

If firms do not increase their quantity supplied when price changes, then supply is:

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore:

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.

If, when price changes by 35 per cent, the quantity demanded changes by 7 per cent, then the absolute value of the price elasticity of demand is 5.

A perfectly elastic demand curve is:

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded, then the demand for golf balls is:

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