Question 1

A local merchant raises the price of his good and finds that his total revenues increase.The demand for this good is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  relatively price sensitive. 
D)  perfectly elastic. 
E)  unitary elastic. 
A)  inelastic. 
B)  elastic. 
C)  relatively price sensitive. 
D)  perfectly elastic. 
E)  unitary elastic.

Question 2

If the cross-price elasticity of demand is 6,Good A and Good B are

Accepted Answer

A)  inferior goods. 
B)  complements. 
C)  substitutes. 
D)  normal goods. 
E)  luxury goods. 
A)  inferior goods. 
B)  complements. 
C)  substitutes. 
D)  normal goods. 
E)  luxury goods.

Question 3

How can a firm increase total revenue?

Accepted Answer

A)  when demand is elastic and price decreases 
B)  when demand is elastic and price increases 
C)  when demand is unitary elastic and price increases 
D)  when demand is unitary elastic and price decreases 
E)  when demand is inelastic and price decreases 
A)  when demand is elastic and price decreases 
B)  when demand is elastic and price increases 
C)  when demand is unitary elastic and price increases 
D)  when demand is unitary elastic and price decreases 
E)  when demand is inelastic and price decreases

Question 4

When the price of pencils increases from $1.50 to $2.50,there is an increase in quantity demanded of pens from 100 to 150.The cross-price elasticity of demand between pencils and pens is

Accepted Answer

A)  1.25. 
B)  0.50. 
C)  0.40. 
D)  0.80. 
E)  0.75. 
A)  1.25. 
B)  0.50. 
C)  0.40. 
D)  0.80. 
E)  0.75.

Question 5

There was a more than proportional decrease in quantity demanded for cupcakes when the local baker raised the price by 20 percent.The price elasticity of demand for cupcakes is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  perfectly inelastic. 
D)  perfectly elastic. 
E)  unitary elastic. 
A)  inelastic. 
B)  elastic. 
C)  perfectly inelastic. 
D)  perfectly elastic. 
E)  unitary elastic.

Question 6

When can a firm lower prices and still increase revenue?

Accepted Answer

A)  when the elasticity of demand is equal to unity 
B)  when the demand curve is horizontal 
C)  when the demand curve is vertical 
D)  when the demand is inelastic 
E)  when the demand is elastic 
A)  when the elasticity of demand is equal to unity 
B)  when the demand curve is horizontal 
C)  when the demand curve is vertical 
D)  when the demand is inelastic 
E)  when the demand is elastic

Question 7

"No matter the price,I will always buy five gallons of ice cream a week.I love ice cream!" This statement reflects a price elasticity of demand that is

Accepted Answer

A)  perfectly elastic. 
B)  elastic. 
C)  unitary. 
D)  inelastic. 
E)  perfectly inelastic. 
A)  perfectly elastic. 
B)  elastic. 
C)  unitary. 
D)  inelastic. 
E)  perfectly inelastic.

Question 8

The makers of academic books find that when they raise the price of the average book from $50 to $75,quantity demanded among students drops from 100 to 90.Among casual readers,quantity demanded drops from 80 to 40.
a.Calculate the price elasticity of demand for each group.
b.Is demand price elastic or price inelastic for each group?
c.Using the determinants of demand,explain why there is a difference in elasticity for each group.

Accepted Answer

a.Students:
= percentage change in quant

Question 9

When Noelle received a promotion at work,her income rose by 50 percent.The income elasticity of demand for steak was found to be 1.5.For her,steak is a(n)

Accepted Answer

A)  inferior good. 
B)  necessity. 
C)  complement to potatoes. 
D)  substitute for chicken. 
E)  luxury. 
A)  inferior good. 
B)  necessity. 
C)  complement to potatoes. 
D)  substitute for chicken. 
E)  luxury.

Question 10

If the income elasticity of demand is -3,the good will be a(n)________ good.

Accepted Answer

A)  complement 
B)  substitute 
C)  necessity 
D)  inferior 
E)  luxury 
A)  complement 
B)  substitute 
C)  necessity 
D)  inferior 
E)  luxury

Question 11

If the income elasticity of demand is 0.5,the good will be a(n)________ good.

Accepted Answer

A)  complement 
B)  substitute 
C)  necessity 
D)  inferior 
E)  luxury 
A)  complement 
B)  substitute 
C)  necessity 
D)  inferior 
E)  luxury

Question 12

The introduction of new gaming systems that can compete effectively with the Nintendo console will make the demand for the Nintendo console become

Accepted Answer

A)  more price elastic. 
B)  more price inelastic. 
C)  perfectly price elastic. 
D)  perfectly price inelastic. 
E)  unchanged. 
A)  more price elastic. 
B)  more price inelastic. 
C)  perfectly price elastic. 
D)  perfectly price inelastic. 
E)  unchanged.

Question 13

When Heavenly Cookies prices its sugar cookies at $1.00,it sells 75 cookies.It lowers the price to $0.50 and sells 200 cookies.Its total revenue ________ because the price elasticity of demand for sugar cookies is ________.

Accepted Answer

A)  rose; elastic 
B)  rose; inelastic 
C)  fell; elastic 
D)  fell; inelastic 
E)  stayed the same; unitary elastic 
A)  rose; elastic 
B)  rose; inelastic 
C)  fell; elastic 
D)  fell; inelastic 
E)  stayed the same; unitary elastic

Question 14

If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15 percent,what is the percentage change in the price of Good A?

Accepted Answer

A)  -10 percent 
B)  -0.10 percent 
C)  -11.50 percent 
D)  -1 percent 
E)  11.50 percent 
A)  -10 percent 
B)  -0.10 percent 
C)  -11.50 percent 
D)  -1 percent 
E)  11.50 percent

Question 15

The cross-price elasticity is measured by

Accepted Answer

A)  percentage change in the price of one good divided by the percentage change in the demand for the other good. 
B)  percentage change in the demand for one good divided by the percentage change in the price of the other good. 
C)  percentage change in the demand for one good divided by the percentage change in the demand for the other good. 
D)  percentage change in the price of one good divided by the percentage change in the price of the other good. 
E)  the change in the price of one good divided by the change in demand for the other good. 
A)  percentage change in the price of one good divided by the percentage change in the demand for the other good. 
B)  percentage change in the demand for one good divided by the percentage change in the price of the other good. 
C)  percentage change in the demand for one good divided by the percentage change in the demand for the other good. 
D)  percentage change in the price of one good divided by the percentage change in the price of the other good. 
E)  the change in the price of one good divided by the change in demand for the other good.

A local merchant raises the price of his good and finds that his total revenues increase.The demand for this good is

If the cross-price elasticity of demand is 6,Good A and Good B are

How can a firm increase total revenue?

When the price of pencils increases from $1.50 to $2.50,there is an increase in quantity demanded of pens from 100 to 150.The cross-price elasticity of demand between pencils and pens is

There was a more than proportional decrease in quantity demanded for cupcakes when the local baker raised the price by 20 percent.The price elasticity of demand for cupcakes is

When can a firm lower prices and still increase revenue?

"No matter the price,I will always buy five gallons of ice cream a week.I love ice cream!" This statement reflects a price elasticity of demand that is

When Noelle received a promotion at work,her income rose by 50 percent.The income elasticity of demand for steak was found to be 1.5.For her,steak is a(n)

If the income elasticity of demand is -3,the good will be a(n)________ good.

If the income elasticity of demand is 0.5,the good will be a(n)________ good.

The introduction of new gaming systems that can compete effectively with the Nintendo console will make the demand for the Nintendo console become

When Heavenly Cookies prices its sugar cookies at $1.00,it sells 75 cookies.It lowers the price to $0.50 and sells 200 cookies.Its total revenue because the price elasticity of demand for sugar cookies is .

If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15 percent,what is the percentage change in the price of Good A?

The cross-price elasticity is measured by

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income,inequality,and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

International Trade

Filters

Exam 4: Elasticity

A local merchant raises the price of his good and finds that his total revenues increase.The demand for this good is

If the cross-price elasticity of demand is 6,Good A and Good B are

How can a firm increase total revenue?

When the price of pencils increases from $1.50 to $2.50,there is an increase in quantity demanded of pens from 100 to 150.The cross-price elasticity of demand between pencils and pens is

There was a more than proportional decrease in quantity demanded for cupcakes when the local baker raised the price by 20 percent.The price elasticity of demand for cupcakes is

When can a firm lower prices and still increase revenue?

"No matter the price,I will always buy five gallons of ice cream a week.I love ice cream!" This statement reflects a price elasticity of demand that is

When Noelle received a promotion at work,her income rose by 50 percent.The income elasticity of demand for steak was found to be 1.5.For her,steak is a(n)

If the income elasticity of demand is -3,the good will be a(n)________ good.

If the income elasticity of demand is 0.5,the good will be a(n)________ good.

The introduction of new gaming systems that can compete effectively with the Nintendo console will make the demand for the Nintendo console become

When Heavenly Cookies prices its sugar cookies at $1.00,it sells 75 cookies.It lowers the price to $0.50 and sells 200 cookies.Its total revenue ________ because the price elasticity of demand for sugar cookies is ________.

If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15 percent,what is the percentage change in the price of Good A?

The cross-price elasticity is measured by

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income,inequality,and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

International Trade

Filters

When Heavenly Cookies prices its sugar cookies at $1.00,it sells 75 cookies.It lowers the price to $0.50 and sells 200 cookies.Its total revenue because the price elasticity of demand for sugar cookies is .