Question 1

If most consumer goods and services are ______, then most income elasticities are ______.

Accepted Answer

A) normal; negative 
B) inferior; positive 
C) normal; greater than one 
D) normal; positive 
A) normal; negative 
B) inferior; positive 
C) normal; greater than one 
D) normal; positive

Question 2

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

Accepted Answer

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

Question 3

In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,

Accepted Answer

A) the supply of water is perfectly inelastic because it is a finite resource. 
B) water production is characterized by increasing opportunity costs. 
C) markets cannot reach equilibrium because there is a persistent shortage of water. 
D) higher water prices can reduce quantity demanded but cannot increase quantity supplied. 
A) the supply of water is perfectly inelastic because it is a finite resource. 
B) water production is characterized by increasing opportunity costs. 
C) markets cannot reach equilibrium because there is a persistent shortage of water. 
D) higher water prices can reduce quantity demanded but cannot increase quantity supplied.

Question 4

On a given linear demand curve, as price increases demand becomes ______

Accepted Answer

A) more elastic. 
B) less elastic. 
C) more negative. 
D) more variable. 
A) more elastic. 
B) less elastic. 
C) more negative. 
D) more variable.

Question 5

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:

Accepted Answer

A) total expenditure would increase. 
B) total expenditure would stay the same. 
C) total expenditure would decrease. 
D) the change in total expenditure, if any, would depend on the supply curve. 
A) total expenditure would increase. 
B) total expenditure would stay the same. 
C) total expenditure would decrease. 
D) the change in total expenditure, if any, would depend on the supply curve.

Question 6

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

Accepted Answer

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

Question 7

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

Accepted Answer

A) the demand for Taylor's earrings at the original price was elastic. 
B) there are many other boutiques competing with Taylor. 
C) there was excess demand for earrings at the original price. 
D) the demand for Taylor's earrings at the original price was inelastic. 
A) the demand for Taylor's earrings at the original price was elastic. 
B) there are many other boutiques competing with Taylor. 
C) there was excess demand for earrings at the original price. 
D) the demand for Taylor's earrings at the original price was inelastic.

Question 8

You have found data that indicates that the income elasticity of demand for generic (unbranded) shampoo is -0.7. You should conclude that generic shampoo:

Accepted Answer

A) is a normal good. 
B) has inelastic demand. 
C) is below its equilibrium price. 
D) is an inferior good. 
A) is a normal good. 
B) has inelastic demand. 
C) is below its equilibrium price. 
D) is an inferior good.

If most consumer goods and services are , then most income elasticities are .

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,

On a given linear demand curve, as price increases demand becomes ______

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

You have found data that indicates that the income elasticity of demand for generic (unbranded) shampoo is -0.7. You should conclude that generic shampoo:

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 most consumer goods and services are ______, then most income elasticities are ______.

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,

On a given linear demand curve, as price increases demand becomes ______

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

You have found data that indicates that the income elasticity of demand for generic (unbranded) shampoo is -0.7. You should conclude that generic shampoo:

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 most consumer goods and services are , then most income elasticities are .