Question 1

The price elasticity of supply tells us:

Accepted Answer

A)  the percentage change in quantity supplied when the price of the good changes by one percent. 
B)  in which direction the quantity supplied changes as we move along the supply curve. 
C)  how quickly the supply will respond to a change in price. 
D)  the magnitude of shift in the supply curve in response to a change in price. 
A)  the percentage change in quantity supplied when the price of the good changes by one percent. 
B)  in which direction the quantity supplied changes as we move along the supply curve. 
C)  how quickly the supply will respond to a change in price. 
D)  the magnitude of shift in the supply curve in response to a change in price.

Question 2

Knowing the price elasticity of demand is important in business because it allows a manager to determine whether:

Accepted Answer

A)  a price increase will cause total revenue to rise or fall. 
B)  an increase in supply will cause total profit to rise or fall. 
C)  a price increase will cause the quantity demanded to rise or fall. 
D)  a price increase will cause the demand to rise or fall. 
A)  a price increase will cause total revenue to rise or fall. 
B)  an increase in supply will cause total profit to rise or fall. 
C)  a price increase will cause the quantity demanded to rise or fall. 
D)  a price increase will cause the demand to rise or fall.

Question 3

When price was 6,quantity demanded was 10.When price decreased to 5,quantity demanded increased to 13.Therefore,when price decreased,total revenue

Accepted Answer

A)  decreased from 65 to 60, indicating that demand is inelastic. 
B)  decreased from 65 to 60, indicating that demand is elastic. 
C)  increased from 60 to 65, indicating that demand is inelastic. 
D)  increased from 60 to 65, indicating that demand is elastic. 
A)  decreased from 65 to 60, indicating that demand is inelastic. 
B)  decreased from 65 to 60, indicating that demand is elastic. 
C)  increased from 60 to 65, indicating that demand is inelastic. 
D)  increased from 60 to 65, indicating that demand is elastic.

Question 4

Suppose an increase in price decreases quantity demanded from 210 to 190.Using the mid-point formula,the percentage change in quantity demanded is:

Accepted Answer

A)  2 = 200 percent. 
B)  0.2 = 20 percent. 
C)  0.2 = 20 percent 
D)  0.1 = 10 percent 
A)  2 = 200 percent. 
B)  0.2 = 20 percent. 
C)  0.2 = 20 percent 
D)  0.1 = 10 percent

Question 5

Demand for a good is inelastic if:

Accepted Answer

A)  total revenue decreases when price decreases. 
B)  the quantity effect outweighs the price effect of a price increase. 
C)  the absolute value of price elasticity is greater than 1. 
D)  None of these is true. 
A)  total revenue decreases when price decreases. 
B)  the quantity effect outweighs the price effect of a price increase. 
C)  the absolute value of price elasticity is greater than 1. 
D)  None of these is true.

Question 6

The demand for ice cream is _________________ than is the demand for frozen treats because ________________.

Accepted Answer

A)  less price elastic; ice cream requires a smaller portion of one's income 
B)  more price elastic; ice cream requires a smaller portion of one's income 
C)  less price elastic; the scope of the market for ice cream is less broadly defined 
D)  more price elastic; the scope of the market for ice cream is less broadly defined 
A)  less price elastic; ice cream requires a smaller portion of one's income 
B)  more price elastic; ice cream requires a smaller portion of one's income 
C)  less price elastic; the scope of the market for ice cream is less broadly defined 
D)  more price elastic; the scope of the market for ice cream is less broadly defined

Question 7

The demand for a cup of coffee is ______________ than is the demand for a dinner at a fancy restaurant because _________________.

Accepted Answer

A)  more price elastic; a cup of coffee requires a smaller portion of one's income. 
B)  less price elastic; a cup of coffee requires a smaller portion of one's income. 
C)  less price elastic; a cup of coffee is more of a luxury. 
D)  more price elastic; a cup of coffee is more of a luxury. 
A)  more price elastic; a cup of coffee requires a smaller portion of one's income. 
B)  less price elastic; a cup of coffee requires a smaller portion of one's income. 
C)  less price elastic; a cup of coffee is more of a luxury. 
D)  more price elastic; a cup of coffee is more of a luxury.

Question 8

The price elasticity of demand for eggs is 0.27.Thus,0.27 is the:

Accepted Answer

A)  percentage change in the quantity demanded of eggs when the price of eggs increases by one percent. 
B)  size of the shift in the demand for eggs when the price of eggs changes by one percent. 
C)  size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price change. 
D)  percentage change in the price of eggs when the quantity demanded of eggs increases by one percent. 
A)  percentage change in the quantity demanded of eggs when the price of eggs increases by one percent. 
B)  size of the shift in the demand for eggs when the price of eggs changes by one percent. 
C)  size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price change. 
D)  percentage change in the price of eggs when the quantity demanded of eggs increases by one percent.

Question 9

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of one indicates:

Accepted Answer

A)  the percentage change in quantity demanded will equal the percentage change in price. 
B)  the percentage change in quantity demanded will equal one. 
C)  both the percentage change in price and quantity demanded must equal one. 
D)  the percentage change in quantity demanded and the percentage change in price must sum to one. 
A)  the percentage change in quantity demanded will equal the percentage change in price. 
B)  the percentage change in quantity demanded will equal one. 
C)  both the percentage change in price and quantity demanded must equal one. 
D)  the percentage change in quantity demanded and the percentage change in price must sum to one.

Question 10

If a small percentage change in price causes a larger percentage change in the quantity demanded,the good has:

Accepted Answer

A)  an inelastic demand. 
B)  a low magnitude of response. 
C)  an elastic demand. 
D)  a high magnitude of response. 
A)  an inelastic demand. 
B)  a low magnitude of response. 
C)  an elastic demand. 
D)  a high magnitude of response.

Question 11

A linear demand curve has a:

Accepted Answer

A)  slope which is the same as the elasticity. 
B)  constant slope, but changing elasticity. 
C)  changing slope, but constant elasticity. 
D)  constant slope and a constant elasticity, but they need not be equal. 
A)  slope which is the same as the elasticity. 
B)  constant slope, but changing elasticity. 
C)  changing slope, but constant elasticity. 
D)  constant slope and a constant elasticity, but they need not be equal.

Question 12

Elasticities are used to measure responses to a change in:

Accepted Answer

A)  the price of a good. 
B)  the price of a related good. 
C)  income. 
D)  All of these are true. 
A)  the price of a good. 
B)  the price of a related good. 
C)  income. 
D)  All of these are true.

Question 13

Demand for a good is inelastic if:

Accepted Answer

A)  total revenue decreases when price increases. 
B)  the quantity effect outweighs the price effect of a price increase. 
C)  the absolute value of price elasticity is greater than 1. 
D)  total revenue increases when price increases. 
A)  total revenue decreases when price increases. 
B)  the quantity effect outweighs the price effect of a price increase. 
C)  the absolute value of price elasticity is greater than 1. 
D)  total revenue increases when price increases.

Question 14

The price elasticity of demand for business air travel is .80 and the price elasticity of demand for leisure air travel is 1.60.Therefore,the demand for leisure air travel

Accepted Answer

A)  is less elastic than the demand for business travel. 
B)  is inelastic. 
C)  is more elastic than the demand for business travel. 
D)  is unrelated to consumers' incomes. 
A)  is less elastic than the demand for business travel. 
B)  is inelastic. 
C)  is more elastic than the demand for business travel. 
D)  is unrelated to consumers' incomes.

Question 15

Demand tends to be more elastic when:

Accepted Answer

A)  price is high and more inelastic when price is low. 
B)  price is low and more inelastic when price is high. 
C)  demand is perfectly inelastic. 
D)  the quantity demanded is larger. 
A)  price is high and more inelastic when price is low. 
B)  price is low and more inelastic when price is high. 
C)  demand is perfectly inelastic. 
D)  the quantity demanded is larger.

Question 16

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of demand greater than one indicates demand:

Accepted Answer

A)  for the good is elastic. 
B)  for the good is inelastic. 
C)  for the good is unitary elastic. 
D)  cannot be determined without more information. 
A)  for the good is elastic. 
B)  for the good is inelastic. 
C)  for the good is unitary elastic. 
D)  cannot be determined without more information.

Question 17

If consumers' buying decisions are not very sensitive to changes in price,then their demand is:

Accepted Answer

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

Question 18

Producers want to calculate the price elasticity of demand because they want to:

Accepted Answer

A)  know the goods and services for which consumers are most sensitive to price changes. 
B)  be able to predict the future preferences of their customers. 
C)  know that consumers will have the same response to a price change regardless of the good or service. 
D)  understand what goods their customers dislike the most. 
A)  know the goods and services for which consumers are most sensitive to price changes. 
B)  be able to predict the future preferences of their customers. 
C)  know that consumers will have the same response to a price change regardless of the good or service. 
D)  understand what goods their customers dislike the most.

Question 19

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged,then probably the demand for Pizza Hut pizza:

Accepted Answer

A)  increases as some people switch from Pizza Hut to Domino's. 
B)  decreases as some people switch from Pizza Hut to Domino's. 
C)  remains unchanged. 
D)  will depend on what happens to the supply of Pizza Hut pizza. 
A)  increases as some people switch from Pizza Hut to Domino's. 
B)  decreases as some people switch from Pizza Hut to Domino's. 
C)  remains unchanged. 
D)  will depend on what happens to the supply of Pizza Hut pizza.

Question 20

When consumers' incomes decline during a recession,they increase their consumption of instant coffee and reduce their consumption of other beverages.Therefore,instant coffee:

Accepted Answer

A)  is a necessity because consumers buy more during a recession. 
B)  has a negative income elasticity of demand. 
C)  has an income elasticity of demand greater than zero but less than one. 
D)  is normal. 
A)  is a necessity because consumers buy more during a recession. 
B)  has a negative income elasticity of demand. 
C)  has an income elasticity of demand greater than zero but less than one. 
D)  is normal.

Exam 4: Elasticity

The price elasticity of supply tells us:

Knowing the price elasticity of demand is important in business because it allows a manager to determine whether:

When price was 6,quantity demanded was 10.When price decreased to 5,quantity demanded increased to 13.Therefore,when price decreased,total revenue

Suppose an increase in price decreases quantity demanded from 210 to 190.Using the mid-point formula,the percentage change in quantity demanded is:

Demand for a good is inelastic if:

The demand for ice cream is _________________ than is the demand for frozen treats because ________________.

The demand for a cup of coffee is ______________ than is the demand for a dinner at a fancy restaurant because _________________.

The price elasticity of demand for eggs is 0.27.Thus,0.27 is the:

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of one indicates:

If a small percentage change in price causes a larger percentage change in the quantity demanded,the good has:

A linear demand curve has a:

Elasticities are used to measure responses to a change in:

Demand for a good is inelastic if:

The price elasticity of demand for business air travel is .80 and the price elasticity of demand for leisure air travel is 1.60.Therefore,the demand for leisure air travel

Demand tends to be more elastic when:

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of demand greater than one indicates demand:

If consumers' buying decisions are not very sensitive to changes in price,then their demand is:

Producers want to calculate the price elasticity of demand because they want to:

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged,then probably the demand for Pizza Hut pizza:

When consumers' incomes decline during a recession,they increase their consumption of instant coffee and reduce their consumption of other beverages.Therefore,instant coffee:

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The demand for ice cream is _ than is the demand for frozen treats because .

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