Question 1

There is a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly inelastic.

Accepted Answer

A) True 
 B)False  True

Question 2

The price elasticity of an upward-sloping supply curve is always

Accepted Answer

A)  positive. 
B)  negative. 
C)  greater than one. 
D)  impossible to determine. 
A)  positive. 
B)  negative. 
C)  greater than one. 
D)  impossible to determine. A

Question 3

Holding everything else constant, the demand for a good tends to be more elastic

Accepted Answer

A)  the more substitutes there are for the good. 
B)  the shorter the time period involved. 
C)  the more consumers perceive the good to be a necessity. 
D)  the less important the product is in consumers' budgets. 
A)  the more substitutes there are for the good. 
B)  the shorter the time period involved. 
C)  the more consumers perceive the good to be a necessity. 
D)  the less important the product is in consumers' budgets. A

Question 4

Which of the following products comes closest to having a perfectly inelastic demand?

Accepted Answer

A)  petrol 
B)  cholesterol medication in general 
C)  iPhones 
D)  bus rides 
A)  petrol 
B)  cholesterol medication in general 
C)  iPhones 
D)  bus rides

Question 5

If the market for a product is broadly defined, then

Accepted Answer

A)  the good has many complements. 
B)  there are few substitutes for the product, and the demand for the product is relatively inelastic. 
C)  there are many substitutes for the product, and the demand for the product is relatively elastic. 
D)  the expenditure on the good is likely to make up a large share of one's budget. 
A)  the good has many complements. 
B)  there are few substitutes for the product, and the demand for the product is relatively inelastic. 
C)  there are many substitutes for the product, and the demand for the product is relatively elastic. 
D)  the expenditure on the good is likely to make up a large share of one's budget.

Question 6

During an economic expansion, as consumer incomes rise, holding everything else constant,

Accepted Answer

A)  the demand for most goods, except luxuries, will rise. 
B)  the demand for luxuries will rise while the demand for inferior goods will fall. 
C)  the demand for luxuries and inferior goods will rise. 
D)  the prices of luxuries will fall while the prices of inferior goods will rise. 
A)  the demand for most goods, except luxuries, will rise. 
B)  the demand for luxuries will rise while the demand for inferior goods will fall. 
C)  the demand for luxuries and inferior goods will rise. 
D)  the prices of luxuries will fall while the prices of inferior goods will rise.

Question 7

To calculate the price elasticity of supply we divide

Accepted Answer

A)  the percentage change in price by the percentage change in quantity supplied. 
B)  the percentage change in quantity supplied by the percentage change in price. 
C)  rise by the run. 
D)  the average price by the average quantity supplied. 
A)  the percentage change in price by the percentage change in quantity supplied. 
B)  the percentage change in quantity supplied by the percentage change in price. 
C)  rise by the run. 
D)  the average price by the average quantity supplied.

Question 8

Suppose when Nablom's Bakery raised the price of its breads by 10 per cent, the quantity demanded fell by 15 per cent. What was the effect on sales revenue?

Accepted Answer

A)  Sales revenue increased. 
B)  Sales revenue remained unchanged. 
C)  Sales revenue decreased. 
D)  It cannot be determined without information on prices. 
A)  Sales revenue increased. 
B)  Sales revenue remained unchanged. 
C)  Sales revenue decreased. 
D)  It cannot be determined without information on prices.

Question 9

Total revenue is equal to

Accepted Answer

A)  the amount of funds earned by a firm minus its costs of production. 
B)  the total quantity sold of a product over a given period of time. 
C)  the price of a product multiplied by the number of units of the product sold. 
D)  the monetary value of the capital (for example, plant and equipment) a firm owns. 
A)  the amount of funds earned by a firm minus its costs of production. 
B)  the total quantity sold of a product over a given period of time. 
C)  the price of a product multiplied by the number of units of the product sold. 
D)  the monetary value of the capital (for example, plant and equipment) a firm owns.

Question 10

What factors would make you more sensitive or less sensitive to price when purchasing petrol?

Accepted Answer

A number of factors are likely to affect

Question 11

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Accepted Answer

A) True 
 B)False

Question 12

When there are few close substitutes available for a good, demand tends to be

Accepted Answer

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

Question 13

If firms do not increase their quantity supplied when price changes, then supply is

Accepted Answer

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

Question 14

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Accepted Answer

A) True 
 B)False

Question 15

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

Accepted Answer

Price elasticity of supply refers to the

Question 16

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

Accepted Answer

A)  The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. 
B)  The absolute value of the elasticity of demand ranges from zero to one. 
C)  Demand is more elastic in the long run than it is in the short run. 
D)  Demand is more elastic the smaller the percentage of the consumer's budget the item takes up. 
A)  The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. 
B)  The absolute value of the elasticity of demand ranges from zero to one. 
C)  Demand is more elastic in the long run than it is in the short run. 
D)  Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Question 17

Explain the concepts of cross-price elasticity of demand and income elasticity of demand. What do positive and negative values indicate for each of these demand elasticities ?

Accepted Answer

Cross-price elasticity of demand measure

Question 18

Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded. Therefore

Accepted Answer

A)  the demand for salt will be perfectly inelastic. 
B)  salt is a normal good. 
C)  the demand for salt is relatively inelastic. 
D)  the price elasticity of demand for salt is greater than 1 (in absolute value). 
A)  the demand for salt will be perfectly inelastic. 
B)  salt is a normal good. 
C)  the demand for salt is relatively inelastic. 
D)  the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 19

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products. If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with

Accepted Answer

A)  a high positive income elasticity coefficient such as 5. 
B)  a low positive income elasticity coefficient such as 0.8. 
C)  a 'high' negative income elasticity coefficient such as -4. 
D)  a 'low' negative income elasticity coefficient such as -0.2. 
A)  a high positive income elasticity coefficient such as 5. 
B)  a low positive income elasticity coefficient such as 0.8. 
C)  a 'high' negative income elasticity coefficient such as -4. 
D)  a 'low' negative income elasticity coefficient such as -0.2.

Question 20

The cross-price elasticity between Gillette razors and a related good is -3.4. What happens to the demand for the related good if the price of Gillette razors falls by 10 per cent?

Accepted Answer

A)  The quantity demanded of the related good rises by 3.4 per cent. 
B)  The quantity demanded of the related good falls by 34 per cent. 
C)  The quantity demanded of the related good rises by 34 per cent. 
D)  The quantity demanded of the related good falls by 3.4 per cent. 
A)  The quantity demanded of the related good rises by 3.4 per cent. 
B)  The quantity demanded of the related good falls by 34 per cent. 
C)  The quantity demanded of the related good rises by 34 per cent. 
D)  The quantity demanded of the related good falls by 3.4 per cent.

There is a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly inelastic.

The price elasticity of an upward-sloping supply curve is always

Holding everything else constant, the demand for a good tends to be more elastic

Which of the following products comes closest to having a perfectly inelastic demand?

If the market for a product is broadly defined, then

During an economic expansion, as consumer incomes rise, holding everything else constant,

To calculate the price elasticity of supply we divide

Suppose when Nablom's Bakery raised the price of its breads by 10 per cent, the quantity demanded fell by 15 per cent. What was the effect on sales revenue?

Total revenue is equal to

What factors would make you more sensitive or less sensitive to price when purchasing petrol?

The price elasticity of supply is calculated as the change in supply divided by the change in price.

When there are few close substitutes available for a good, demand tends to be

If firms do not increase their quantity supplied when price changes, then supply is

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

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

Explain the concepts of cross-price elasticity of demand and income elasticity of demand. What do positive and negative values indicate for each of these demand elasticities ?

Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded. Therefore

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products. If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with

The cross-price elasticity between Gillette razors and a related good is -3.4. What happens to the demand for the related good if the price of Gillette razors falls by 10 per cent?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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Exam 4: Elasticity: The Responsiveness of Demand and Supply

There is a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly inelastic.

The price elasticity of an upward-sloping supply curve is always

Holding everything else constant, the demand for a good tends to be more elastic

Which of the following products comes closest to having a perfectly inelastic demand?

If the market for a product is broadly defined, then

During an economic expansion, as consumer incomes rise, holding everything else constant,

To calculate the price elasticity of supply we divide

Suppose when Nablom's Bakery raised the price of its breads by 10 per cent, the quantity demanded fell by 15 per cent. What was the effect on sales revenue?

Total revenue is equal to

What factors would make you more sensitive or less sensitive to price when purchasing petrol?

The price elasticity of supply is calculated as the change in supply divided by the change in price.

When there are few close substitutes available for a good, demand tends to be

If firms do not increase their quantity supplied when price changes, then supply is

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

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

Explain the concepts of cross-price elasticity of demand and income elasticity of demand. What do positive and negative values indicate for each of these demand elasticities ?

Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded. Therefore

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products. If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with

The cross-price elasticity between Gillette razors and a related good is -3.4. What happens to the demand for the related good if the price of Gillette razors falls by 10 per cent?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters