Question 1

If two products are substitutes, then the:

Accepted Answer

A) income elasticity of demand for both will be high. 
B) price elasticity of demand for both will be positive. 
C) cross-price elasticity of demand between them will be negative. 
D) cross-price elasticity of demand between them will be positive. 
A) income elasticity of demand for both will be high. 
B) price elasticity of demand for both will be positive. 
C) cross-price elasticity of demand between them will be negative. 
D) cross-price elasticity of demand between them will be positive.

Question 2

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by:

Accepted Answer

A) 0.55 percent. 
B) 5.5 percent. 
C) 55 percent. 
D) 550 percent. 
A) 0.55 percent. 
B) 5.5 percent. 
C) 55 percent. 
D) 550 percent.

Question 3

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

Accepted Answer

A) 0.3. 
B) 0.533. 
C) 1.6. 
D) 1.875. 
A) 0.3. 
B) 0.533. 
C) 1.6. 
D) 1.875.

Question 4

Satellite TV is a close substitute for cable TV. In the 1990's, small satellite TV units were developed that made it less costly for individual consumers to subscribe to satellite TV service. This caused the price elasticity of demand for cable TV service to:

Accepted Answer

A) become more inelastic. 
B) become less elastic. 
C) become more elastic. 
D) shift to the left. 
A) become more inelastic. 
B) become less elastic. 
C) become more elastic. 
D) shift to the left.

Question 5

If demand is ______ with respect to price, a price increase will ______ total revenue.

Accepted Answer

A) elastic; increase 
B) inelastic; increase 
C) unit elastic; decrease 
D) inelastic; decrease 
A) elastic; increase 
B) inelastic; increase 
C) unit elastic; decrease 
D) inelastic; decrease

Question 6

Refer to the figure below. What is the price elasticity of demand when the price of rice is $6 per pound?

Accepted Answer

A) 0.5 
B) 0.67 
C) 2 
D) 3 
A) 0.5 
B) 0.67 
C) 2 
D) 3

Question 7

If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

Accepted Answer

A) there was excess demand at the original price. 
B) there was excess supply at the original price. 
C) the price elasticity of demand at the original price was greater than one. 
D) the price elasticity of demand at the original price was less than one. 
A) there was excess demand at the original price. 
B) there was excess supply at the original price. 
C) the price elasticity of demand at the original price was greater than one. 
D) the price elasticity of demand at the original price was less than one.

Question 8

Oil and oil products remain the main fuel for cars, planes, ships, and power plants. The amount of oil still in the earth is finite. Given this information, the supply of gasoline is ______.

Accepted Answer

A) relatively elastic 
B) relatively inelastic 
C) unit elastic 
D) greater than the quantity demanded 
A) relatively elastic 
B) relatively inelastic 
C) unit elastic 
D) greater than the quantity demanded

Question 9

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

Accepted Answer

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

Question 10

Refer to the figure below. Let εX denote the price elasticity of demand at point X. Which of the following describes the relationship between εA, εB and εC?

Accepted Answer

A) εA> εC> εB 
B) εA> εB> εC 
C) εC> εB> εA 
D) εB> εC> εA 
A) εA> εC> εB 
B) εA> εB> εC 
C) εC> εB> εA 
D) εB> εC> εA

Question 11

Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will:

Accepted Answer

A) increase because the Internet offers more substitutes. 
B) decrease because the Internet offers more substitutes. 
C) remain the same, but the quantity demanded will decrease as more people shop online. 
D) remain the same, but the demand will decrease as more people shop online. 
A) increase because the Internet offers more substitutes. 
B) decrease because the Internet offers more substitutes. 
C) remain the same, but the quantity demanded will decrease as more people shop online. 
D) remain the same, but the demand will decrease as more people shop online.

Question 12

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 13

All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big-ticket items such as flat-screen TVs.

Accepted Answer

A) higher 
B) lower 
C) very high 
D) the same 
A) higher 
B) lower 
C) very high 
D) the same

Question 14

Refer to the figure below. If P = $6, then the price elasticity of supply is:

Accepted Answer

A) less than zero 
B) positive, but less than one 
C) one 
D) greater than one 
A) less than zero 
B) positive, but less than one 
C) one 
D) greater than one

Question 15

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 16

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is:

Accepted Answer

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

Question 17

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

Accepted Answer

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

Question 18

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

Accepted Answer

A) (P/Q) × (1/slope) 
B) (Q/P) × (1/slope) 
C) (P/Q) × (slope) 
D) Q × P × (1/slope) 
A) (P/Q) × (1/slope) 
B) (Q/P) × (1/slope) 
C) (P/Q) × (slope) 
D) Q × P × (1/slope)

Question 19

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 20

The cross-price elasticity of demand between bread and potatoes is estimated to be 0.5. This implies bread and potatoes are:

Accepted Answer

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

If two products are substitutes, then the:

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by:

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

Satellite TV is a close substitute for cable TV. In the 1990's, small satellite TV units were developed that made it less costly for individual consumers to subscribe to satellite TV service. This caused the price elasticity of demand for cable TV service to:

If demand is with respect to price, a price increase will total revenue.

Refer to the figure below. What is the price elasticity of demand when the price of rice is $6 per pound?

If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

Oil and oil products remain the main fuel for cars, planes, ships, and power plants. The amount of oil still in the earth is finite. Given this information, the supply of gasoline is ______.

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

Refer to the figure below. Let ε_X denote the price elasticity of demand at point X. Which of the following describes the relationship between ε_A, ε_B and ε_C?

Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will:

The price elasticity of demand equals 1:

All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big-ticket items such as flat-screen TVs.

Refer to the figure below. If P = $6, then the price elasticity of supply is:

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

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is:

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

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 ______.

The cross-price elasticity of demand between bread and potatoes is estimated to be 0.5. This implies bread and potatoes are:

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

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Exam 4: Elasticity

If two products are substitutes, then the:

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by:

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

Satellite TV is a close substitute for cable TV. In the 1990's, small satellite TV units were developed that made it less costly for individual consumers to subscribe to satellite TV service. This caused the price elasticity of demand for cable TV service to:

If demand is ______ with respect to price, a price increase will ______ total revenue.

Refer to the figure below. What is the price elasticity of demand when the price of rice is $6 per pound?

If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

Oil and oil products remain the main fuel for cars, planes, ships, and power plants. The amount of oil still in the earth is finite. Given this information, the supply of gasoline is ______.

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

Refer to the figure below. Let εX denote the price elasticity of demand at point X. Which of the following describes the relationship between εA, εB and εC?

Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will:

The price elasticity of demand equals 1:

All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big-ticket items such as flat-screen TVs.

Refer to the figure below. If P = $6, then the price elasticity of supply is:

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

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is:

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

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 ______.

The cross-price elasticity of demand between bread and potatoes is estimated to be 0.5. This implies bread and potatoes are:

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

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

If demand is with respect to price, a price increase will total revenue.

Refer to the figure below. Let ε_X denote the price elasticity of demand at point X. Which of the following describes the relationship between ε_A, ε_B and ε_C?