Question 1

Suppose the cross-price elasticity of demand between raspberry jam and strawberry jam is 7.5.The interpretation of this result is that

Accepted Answer

A) a 10% increase in the price of strawberry jam leads to a 7.5% increase in quantity demanded of raspberry jam. 
B) a 10% increase in the price of strawberry jam leads to a 0.75% increase in quantity demanded of raspberry jam. 
C) a 10% increase in the price of strawberry jam leads to a 75% increase in quantity demanded of raspberry jam. 
D) a 10% increase in the price of strawberry jam leads to a 7.5% decrease in quantity demanded of raspberry jam. 
E) a 10% increase in the price of strawberry jam leads to a 75% decrease in quantity demanded of raspberry jam. 
A) a 10% increase in the price of strawberry jam leads to a 7.5% increase in quantity demanded of raspberry jam. 
B) a 10% increase in the price of strawberry jam leads to a 0.75% increase in quantity demanded of raspberry jam. 
C) a 10% increase in the price of strawberry jam leads to a 75% increase in quantity demanded of raspberry jam. 
D) a 10% increase in the price of strawberry jam leads to a 7.5% decrease in quantity demanded of raspberry jam. 
E) a 10% increase in the price of strawberry jam leads to a 75% decrease in quantity demanded of raspberry jam. C

Question 2

FIGURE 4-2
-Refer to Figure 4-2.In diagram 3,the elasticity of demand between prices $5 and $10 is

Accepted Answer

A) 0. 
B) less than 1. 
C) exactly 1. 
D) greater than 1. 
E) infinity. 
A) 0. 
B) less than 1. 
C) exactly 1. 
D) greater than 1. 
E) infinity. C

Question 3

Elasticity of demand for prescription drugs is estimated to be much lower than elasticity of demand for one particular brand of over-the-counter cough medicine.One reason for this is

Accepted Answer

A) there are many substitutes for prescription drugs in the short run. 
B) there are many substitutes for prescription drugs in the long run. 
C) there are no substitutes for one brand of cough medicine in the short run. 
D) there are no substitutes for one brand of cough medicine in the long run. 
E) there are few substitutes for the broad category of prescription drugs while there are many substitutes for one brand of cough medicine. 
A) there are many substitutes for prescription drugs in the short run. 
B) there are many substitutes for prescription drugs in the long run. 
C) there are no substitutes for one brand of cough medicine in the short run. 
D) there are no substitutes for one brand of cough medicine in the long run. 
E) there are few substitutes for the broad category of prescription drugs while there are many substitutes for one brand of cough medicine. E

Question 4

As the price for some product increases from $4.00 to $5.00 per unit,quantity demanded decreases from 400 to 300 units per month.For this segment of the demand curve,the price elasticity of demand is

Accepted Answer

A) 7/9. 
B) 1. 
C) 9/7. 
D) 7. 
E) 9. 
A) 7/9. 
B) 1. 
C) 9/7. 
D) 7. 
E) 9.

Question 5

FIGURE 4-2
-Refer to Figure 4-2.In diagram 1,the elasticity of demand for prices below $10 is

Accepted Answer

A) 0. 
B) less than 1. 
C) 1. 
D) greater than 1. 
E) infinity. 
A) 0. 
B) less than 1. 
C) 1. 
D) greater than 1. 
E) infinity.

Question 6

If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is

Accepted Answer

A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) equal to one (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given. 
A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) equal to one (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given.

Question 7

FIGURE 4-2
-Refer to Figure 4-2.The price elasticity of demand is continuously increasing as the price falls in diagram(s)

Accepted Answer

A) 1. 
B) 2. 
C) 1,2,and 3. 
D) 2,3,and 4. 
E) none of the above 
A) 1. 
B) 2. 
C) 1,2,and 3. 
D) 2,3,and 4. 
E) none of the above

Question 8

When national income falls,sales of vacation packages also fall,even at constant prices.This fact suggests that the ________ elasticity of demand for vacation packages is ________.

Accepted Answer

A) income; positive 
B) income; negative 
C) price; positive 
D) price; negative 
E) cross; positive 
A) income; positive 
B) income; negative 
C) price; positive 
D) price; negative 
E) cross; positive

Question 9

Consider the following data for a hypothetical economy.
   TABLE 4-5
-Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is ________.We can therefore conclude that these two goods are ________.

Accepted Answer

A) 0.5; substitutes 
B) 0.2; substitutes 
C) 5.0; complements 
D) 0.2; complements 
E) 0.33; substitutes 
A) 0.5; substitutes 
B) 0.2; substitutes 
C) 5.0; complements 
D) 0.2; complements 
E) 0.33; substitutes

Question 10

The formula for the price elasticity of demand for a commodity can be written as which of the following?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 11

Which of the following statements would you expect to be true about price elasticities of demand for T-shirts and clothing?

Accepted Answer

A) Compared with clothing,T-shirts have a lower price elasticity of demand because they are specifically defined. 
B) Because T-shirts are clothing,but not all clothing is T-shirts,T-shirts would have a lower price elasticity of demand than clothing. 
C) Clothing has a higher price elasticity of demand because it is a necessity. 
D) T-shirts would have the same price elasticity of demand as clothing. 
E) Clothing has a lower price elasticity of demand because it is more broadly defined. 
A) Compared with clothing,T-shirts have a lower price elasticity of demand because they are specifically defined. 
B) Because T-shirts are clothing,but not all clothing is T-shirts,T-shirts would have a lower price elasticity of demand than clothing. 
C) Clothing has a higher price elasticity of demand because it is a necessity. 
D) T-shirts would have the same price elasticity of demand as clothing. 
E) Clothing has a lower price elasticity of demand because it is more broadly defined.

Question 12

With a downward-sloping straight-line demand curve,price elasticity of demand is

Accepted Answer

A) rising continuously with price increases. 
B) decreasing continuously with price increases. 
C) increasing to the midpoint of the curve and then decreasing. 
D) constant everywhere on it. 
E) indeterminate. 
A) rising continuously with price increases. 
B) decreasing continuously with price increases. 
C) increasing to the midpoint of the curve and then decreasing. 
D) constant everywhere on it. 
E) indeterminate.

Question 13

FIGURE 4-3
-Refer to Figure 4-3.The diagram shows a rightward shift in the demand curve for some good,and the short-run and long-run supply curves (SS and SL,respectively).In the new short-run equilibrium after the increase in demand,producers' revenue

Accepted Answer

A) is unambiguously lower than in the long-run equilibrium at EL. 
B) could be higher or lower than at E0,depending on the short-run elasticity of supply. 
C) is unambiguously higher than at E0. 
D) is unambiguously lower than at E0. 
E) is unambiguously higher than at EL. 
A) is unambiguously lower than in the long-run equilibrium at EL. 
B) could be higher or lower than at E0,depending on the short-run elasticity of supply. 
C) is unambiguously higher than at E0. 
D) is unambiguously lower than at E0. 
E) is unambiguously higher than at EL.

Question 14

Suppose the current level of output of some good is 100 units.If market demand is inelastic at that quantity,total expenditure on this product would be higher if output was

Accepted Answer

A) maximized. 
B) kept constant. 
C) greater than 100 units. 
D) less than 100 units. 
E) minimized. 
A) maximized. 
B) kept constant. 
C) greater than 100 units. 
D) less than 100 units. 
E) minimized.

Question 15

Income elasticity of demand measures the extent to which

Accepted Answer

A) the price of a good changes when there is a change in income. 
B) the quantity demanded of a good changes when income changes. 
C) real household income changes when there is a change in the price of a good. 
D) one household's income changes when there is a change in the income of another household. 
E) quantity demanded changes when there is a change in price. 
A) the price of a good changes when there is a change in income. 
B) the quantity demanded of a good changes when income changes. 
C) real household income changes when there is a change in the price of a good. 
D) one household's income changes when there is a change in the income of another household. 
E) quantity demanded changes when there is a change in price.

Question 16

Suppose the price of take-out pizza has been stable for many months at exactly $12.50 per pizza - and Olivier buys 6 pizzas per month at this price.When the price rises to $12.55 per pizza,Olivier's quantity demanded drops to zero.Apparently,Olivier's price elasticity of demand for take-out pizza is

Accepted Answer

A) -1. 
B) 0. 
C) 100 
D) 6. 
E) higher than 10 000. 
A) -1. 
B) 0. 
C) 100 
D) 6. 
E) higher than 10 000.

Question 17

If two goods,X and Y,have a negative cross elasticity of demand,then we know that they

Accepted Answer

A) are substitutes. 
B) are complements. 
C) are both inferior goods. 
D) each have a price elasticity greater than one. 
E) are both normal goods. 
A) are substitutes. 
B) are complements. 
C) are both inferior goods. 
D) each have a price elasticity greater than one. 
E) are both normal goods.

Question 18

FIGURE 4-2
-Refer to Figure 4-2.As price decreases,total expenditure remains constant in diagram(s)

Accepted Answer

A) 1. 
B) 2. 
C) 3. 
D) 4. 
E) 2 and 4. 
A) 1. 
B) 2. 
C) 3. 
D) 4. 
E) 2 and 4.

Question 19

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantity supplied rises from 500 to 1000 units per month.The price elasticity of supply for this product is

Accepted Answer

A) 0.33. 
B) 2.0. 
C) 2.5. 
D) 3.0. 
E) 1.0. 
A) 0.33. 
B) 2.0. 
C) 2.5. 
D) 3.0. 
E) 1.0.

Question 20

Suppose the price elasticity of demand for good X is 1.5.If household income increases by 25%,ceteris paribus,what is the change in quantity demanded for good X?

Accepted Answer

A) a 37.5% increase in quantity demanded 
B) a 3.75% increase in quantity demanded 
C) a 0.375% increase in quantity demanded 
D) no change in quantity demanded 
E) There is not enough information to answer this question. 
A) a 37.5% increase in quantity demanded 
B) a 3.75% increase in quantity demanded 
C) a 0.375% increase in quantity demanded 
D) no change in quantity demanded 
E) There is not enough information to answer this question.

Exam 4: Elasticity

Suppose the cross-price elasticity of demand between raspberry jam and strawberry jam is 7.5.The interpretation of this result is that

FIGURE 4-2 -Refer to Figure 4-2.In diagram 3,the elasticity of demand between prices $5 and $10 is

Elasticity of demand for prescription drugs is estimated to be much lower than elasticity of demand for one particular brand of over-the-counter cough medicine.One reason for this is

As the price for some product increases from $4.00 to $5.00 per unit,quantity demanded decreases from 400 to 300 units per month.For this segment of the demand curve,the price elasticity of demand is

FIGURE 4-2 -Refer to Figure 4-2.In diagram 1,the elasticity of demand for prices below $10 is

If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is

FIGURE 4-2 -Refer to Figure 4-2.The price elasticity of demand is continuously increasing as the price falls in diagram(s)

When national income falls,sales of vacation packages also fall,even at constant prices.This fact suggests that the ________ elasticity of demand for vacation packages is ________.

Consider the following data for a hypothetical economy. TABLE 4-5 -Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is ________.We can therefore conclude that these two goods are ________.

The formula for the price elasticity of demand for a commodity can be written as which of the following?

Which of the following statements would you expect to be true about price elasticities of demand for T-shirts and clothing?

With a downward-sloping straight-line demand curve,price elasticity of demand is

FIGURE 4-3 -Refer to Figure 4-3.The diagram shows a rightward shift in the demand curve for some good,and the short-run and long-run supply curves (SS and SL,respectively).In the new short-run equilibrium after the increase in demand,producers' revenue

Suppose the current level of output of some good is 100 units.If market demand is inelastic at that quantity,total expenditure on this product would be higher if output was

Income elasticity of demand measures the extent to which

If two goods,X and Y,have a negative cross elasticity of demand,then we know that they

FIGURE 4-2 -Refer to Figure 4-2.As price decreases,total expenditure remains constant in diagram(s)

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantity supplied rises from 500 to 1000 units per month.The price elasticity of supply for this product is

Suppose the price elasticity of demand for good X is 1.5.If household income increases by 25%,ceteris paribus,what is the change in quantity demanded for good X?

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Filters

When national income falls,sales of vacation packages also fall,even at constant prices.This fact suggests that the elasticity of demand for vacation packages is .

Consider the following data for a hypothetical economy. TABLE 4-5 -Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is .We can therefore conclude that these two goods are .

FIGURE 4-3 -Refer to Figure 4-3.The diagram shows a rightward shift in the demand curve for some good,and the short-run and long-run supply curves (S_S and S_L,respectively).In the new short-run equilibrium after the increase in demand,producers' revenue