Question 1

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208.What is the value of the cross elasticity?

Accepted Answer

A) + 0.2. 
B) + 0.4. 
C) + 1.0. 
D) + 2.5. 
E) + 5.0. 
A) + 0.2. 
B) + 0.4. 
C) + 1.0. 
D) + 2.5. 
E) + 5.0.

Question 2

Which of the two following pairs of product categories are income elastic?

Accepted Answer

A) Food and housing. 
B) Public transport and household operation. 
C) Tobacco and alcohol. 
D) Education and textbooks. 
A) Food and housing. 
B) Public transport and household operation. 
C) Tobacco and alcohol. 
D) Education and textbooks.

Question 3

The graph below illustrates three demand curves.
  
-Refer to the graph above to answer this question.Which of the following statements is correct?

Accepted Answer

A) Demand curve D3 is the most inelastic demand. 
B) Equilibrium price must be $50. 
C) If price is $30 and demand is D3 then the quantity demanded is 720 units per day. 
D) Demand curve D1 is more inelastic than D3. 
E) Demand curve D1 is perfectly elastic. 
A) Demand curve D3 is the most inelastic demand. 
B) Equilibrium price must be $50. 
C) If price is $30 and demand is D3 then the quantity demanded is 720 units per day. 
D) Demand curve D1 is more inelastic than D3. 
E) Demand curve D1 is perfectly elastic.

Question 4

-Graphically,what is the effect of imposing an excise tax on a product?

Accepted Answer

A) It will shift both the supply and the demand curve for the product to the left. 
B) It will shift the supply curve for the product to the left. 
C) It will shift the supply curve for the product to the right. 
D) It will shift both the supply and the demand curve for the product to the right. 
E) It will shift the supply curve for the product to the left and the demand curve to the right. 
A) It will shift both the supply and the demand curve for the product to the left. 
B) It will shift the supply curve for the product to the left. 
C) It will shift the supply curve for the product to the right. 
D) It will shift both the supply and the demand curve for the product to the right. 
E) It will shift the supply curve for the product to the left and the demand curve to the right.

Question 5

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

Accepted Answer

The cross-price elasticity is the percen

Question 6

What is a normal good?

Accepted Answer

A) It is a good whose income elasticity of demand is less than zero. 
B) It is a good whose demand will rise as income rises. 
C) It is a good that has many substitutes. 
D) It is a necessity. 
A) It is a good whose income elasticity of demand is less than zero. 
B) It is a good whose demand will rise as income rises. 
C) It is a good that has many substitutes. 
D) It is a necessity.

Question 7

Suppose that household income in Charlottetown increases from $44,000 to $45,000 and,assuming no change in price the quantity of Baker Baked Beans rises from 90 to 94 cases per week.
a)What is income elasticity of demand for the beans?
b)What does this suggest about this product?

Accepted Answer

a)+1.97
b)

Question 8

What is the effect on total revenue if demand is inelastic and price rises?

Accepted Answer

A) Total revenue will fall. 
B) Total revenue will rise. 
C) Total revenue may rise or fall depending on the size of the price increase. 
D) Elasticity is not relevant,since total revenue always rises if price increases. 
A) Total revenue will fall. 
B) Total revenue will rise. 
C) Total revenue may rise or fall depending on the size of the price increase. 
D) Elasticity is not relevant,since total revenue always rises if price increases.

Question 9

-Refer to the graphs above to answer this question.Suppose that the price of orange juice increases from P1 to P2 and the demand curve for apple juice shifts to the right from D1 to D2.What is the effect to total revenue from the sale of apple juice?

Accepted Answer

A) Total revenue will not change since the cross-elasticity coefficient is not known. 
B) Total revenue will rise. 
C) Total revenue may rise or fall depending on the size of the price increase. 
D) Total revenue will fall. 
E) Total revenue will not change since there is no change in the price of apple juice. 
A) Total revenue will not change since the cross-elasticity coefficient is not known. 
B) Total revenue will rise. 
C) Total revenue may rise or fall depending on the size of the price increase. 
D) Total revenue will fall. 
E) Total revenue will not change since there is no change in the price of apple juice.

Question 10

What term is used to describe quantities demanded that do not change much in response to a change in price?

Accepted Answer

A) Inelastic demand. 
B) Elastic demand. 
C) Unitary elasticity. 
D) Price elasticity of demand. 
E) The elasticity coefficient. 
A) Inelastic demand. 
B) Elastic demand. 
C) Unitary elasticity. 
D) Price elasticity of demand. 
E) The elasticity coefficient.

Question 11

Below are some data on price,income and demand for five different time periods.
  
-Refer to the information above to answer this question.Between years 4 and 5,both the price and the quantity demanded of X increased.What is the best possible explanation of this?

Accepted Answer

A) Graphically,the demand curve for X must be upward sloping. 
B) Product Y is a complement of product X. 
C) Product X is a substitute for product Y. 
D) Graphically,the demand curve for product X must have shifted leftwards. 
E) None of the choices are correct. 
A) Graphically,the demand curve for X must be upward sloping. 
B) Product Y is a complement of product X. 
C) Product X is a substitute for product Y. 
D) Graphically,the demand curve for product X must have shifted leftwards. 
E) None of the choices are correct.

Question 12

What is an excise tax? Demonstrate the effect of an excise tax paid by suppliers on equilibrium quantity and price.

Accepted Answer

An excise tax is a tax levied on a speci

Question 13

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit.What portion of the tax will be paid by the producer?

Accepted Answer

The more inelastic the demand curve of a

Question 14

Table 4.2 shows Alex's demand schedule for chocolate bars.
Table 4.2

Accepted Answer

a)Calculate the price elasticity of dema

Question 15

Why is the price elasticity of demand for toothpicks so different from that of houses?

Accepted Answer

The elasticity of demand for toothpicks

Question 16

Suppose that the price of a product increased from $1.90 to $2.10,and the quantity demanded decreased from 24 to 16.What is the value of the price elasticity of demand?

Accepted Answer

A) 0.5. 
B) 0.58. 
C) 1.0. 
D) 1.73. 
E) 4.0. 
A) 0.5. 
B) 0.58. 
C) 1.0. 
D) 1.73. 
E) 4.0.

Question 17

The graph below illustrates three demand curves.
  
-Refer to the graph above to answer this question.In the $50 to $60 price range,which of the following statements is correct?

Accepted Answer

A) D1 and D2 are both elastic. 
B) D1 and D2 are both perfectly inelastic. 
C) D2 is the most inelastic. 
D) D3 is the most inelastic. 
E) D1 is the most inelastic. 
A) D1 and D2 are both elastic. 
B) D1 and D2 are both perfectly inelastic. 
C) D2 is the most inelastic. 
D) D3 is the most inelastic. 
E) D1 is the most inelastic.

Question 18

How can income elasticity be used to determine whether a good is normal or inferior?

Accepted Answer

The sign of the income elastic

Question 19

What is the formula used to calculate the price elasticity of demand?

Accepted Answer

A) Change in price divided by change in quantity demanded. 
B) Change in quantity demanded divided by change in price. 
C) Percentage change in price divided by percentage change in quantity demanded. 
D) Percentage change in quantity demanded divided by percentage change in price 
A) Change in price divided by change in quantity demanded. 
B) Change in quantity demanded divided by change in price. 
C) Percentage change in price divided by percentage change in quantity demanded. 
D) Percentage change in quantity demanded divided by percentage change in price

Question 20

Which of the following statements is true about the price elasticity of demand?

Accepted Answer

A) It is higher in the short run than in the long run because people's habits change slowly. 
B) It is higher in the long run than the short run because people have more time to find substitute products. 
C) It is the same in the short run and the long run. 
D) It is higher in the short run because markets adjust slowly to changes. 
A) It is higher in the short run than in the long run because people's habits change slowly. 
B) It is higher in the long run than the short run because people have more time to find substitute products. 
C) It is the same in the short run and the long run. 
D) It is higher in the short run because markets adjust slowly to changes.

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208.What is the value of the cross elasticity?

Which of the two following pairs of product categories are income elastic?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question.Which of the following statements is correct?

-Graphically,what is the effect of imposing an excise tax on a product?

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

What is a normal good?

Suppose that household income in Charlottetown increases from $44,000 to $45,000 and,assuming no change in price the quantity of Baker Baked Beans rises from 90 to 94 cases per week. a)What is income elasticity of demand for the beans? b)What does this suggest about this product?

What is the effect on total revenue if demand is inelastic and price rises?

-Refer to the graphs above to answer this question.Suppose that the price of orange juice increases from P₁ to P₂ and the demand curve for apple juice shifts to the right from D₁ to D₂.What is the effect to total revenue from the sale of apple juice?

What term is used to describe quantities demanded that do not change much in response to a change in price?

Below are some data on price,income and demand for five different time periods. -Refer to the information above to answer this question.Between years 4 and 5,both the price and the quantity demanded of X increased.What is the best possible explanation of this?

What is an excise tax? Demonstrate the effect of an excise tax paid by suppliers on equilibrium quantity and price.

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit.What portion of the tax will be paid by the producer?

Table 4.2 shows Alex's demand schedule for chocolate bars. Table 4.2

Why is the price elasticity of demand for toothpicks so different from that of houses?

Suppose that the price of a product increased from $1.90 to $2.10,and the quantity demanded decreased from 24 to 16.What is the value of the price elasticity of demand?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question.In the $50 to $60 price range,which of the following statements is correct?

How can income elasticity be used to determine whether a good is normal or inferior?

What is the formula used to calculate the price elasticity of demand?

Which of the following statements is true about the price elasticity of demand?

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

Perfect Competition

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

Exam 4: Elasticity

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208.What is the value of the cross elasticity?

Which of the two following pairs of product categories are income elastic?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question.Which of the following statements is correct?

-Graphically,what is the effect of imposing an excise tax on a product?

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

What is a normal good?

Suppose that household income in Charlottetown increases from $44,000 to $45,000 and,assuming no change in price the quantity of Baker Baked Beans rises from 90 to 94 cases per week. a)What is income elasticity of demand for the beans? b)What does this suggest about this product?

What is the effect on total revenue if demand is inelastic and price rises?

-Refer to the graphs above to answer this question.Suppose that the price of orange juice increases from P1 to P2 and the demand curve for apple juice shifts to the right from D1 to D2.What is the effect to total revenue from the sale of apple juice?

What term is used to describe quantities demanded that do not change much in response to a change in price?

Below are some data on price,income and demand for five different time periods. -Refer to the information above to answer this question.Between years 4 and 5,both the price and the quantity demanded of X increased.What is the best possible explanation of this?

What is an excise tax? Demonstrate the effect of an excise tax paid by suppliers on equilibrium quantity and price.

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit.What portion of the tax will be paid by the producer?

Table 4.2 shows Alex's demand schedule for chocolate bars. Table 4.2

Why is the price elasticity of demand for toothpicks so different from that of houses?

Suppose that the price of a product increased from $1.90 to $2.10,and the quantity demanded decreased from 24 to 16.What is the value of the price elasticity of demand?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question.In the $50 to $60 price range,which of the following statements is correct?

How can income elasticity be used to determine whether a good is normal or inferior?

What is the formula used to calculate the price elasticity of demand?

Which of the following statements is true about the price elasticity of demand?

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

Perfect Competition

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

-Refer to the graphs above to answer this question.Suppose that the price of orange juice increases from P₁ to P₂ and the demand curve for apple juice shifts to the right from D₁ to D₂.What is the effect to total revenue from the sale of apple juice?