Question 1

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing

Accepted Answer

A)  the percentage change in quantity demanded of Coca-Cola by the percentage change in the quantity demanded of Pepsi-Cola. 
B)  the percentage change in the price of Pepsi-Cola by the percentage change in quantity demanded of Coca-Cola. 
C)  the percentage change in the price of Coca-Cola by the percentage change in the price of Pepsi-Cola. 
D)  the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of Pepsi-Cola. 
A)  the percentage change in quantity demanded of Coca-Cola by the percentage change in the quantity demanded of Pepsi-Cola. 
B)  the percentage change in the price of Pepsi-Cola by the percentage change in quantity demanded of Coca-Cola. 
C)  the percentage change in the price of Coca-Cola by the percentage change in the price of Pepsi-Cola. 
D)  the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of Pepsi-Cola.

Question 2

When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic.

Accepted Answer

A) True 
 B)False

Question 3

Consider the following types of demand curves: a. a vertical demand curve
B. a horizontal demand curve
C. a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Accepted Answer

A)  a only 
B)  b only 
C)  a and b only 
D)  a, b, and c 
A)  a only 
B)  b only 
C)  a and b only 
D)  a, b, and c

Question 4

The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.

Accepted Answer

A) True 
 B)False

Question 5

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true?

Accepted Answer

A)  The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. 
B)  The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. 
C)  The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time, the price of oil increases significantly. 
D)  Over short periods of time, increases in the demand for oil are greater than increases in the supply of oil. Over the long run, increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run. 
A)  The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. 
B)  The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. 
C)  The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time, the price of oil increases significantly. 
D)  Over short periods of time, increases in the demand for oil are greater than increases in the supply of oil. Over the long run, increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

Question 7

If, when price changes by 35 per cent, the quantity demanded changes by 7 per cent, then the absolute value of the price elasticity of demand is 5.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

Accepted Answer

A)  0.003 
B)  0.41 
C)  2.43 
D)  4 
A)  0.003 
B)  0.41 
C)  2.43 
D)  4

Question 9

Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.

Accepted Answer

A)  1.67 
B)  1.0 
C)  0.6 
D)  0.53 
A)  1.67 
B)  1.0 
C)  0.6 
D)  0.53

Question 10

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A)  A wide variety of substitutes are available for the good. 
B)  The time period under consideration is short. 
C)  The good is a necessity. 
D)  The expenditure on the good is small relative to one's budget. 
A)  A wide variety of substitutes are available for the good. 
B)  The time period under consideration is short. 
C)  The good is a necessity. 
D)  The expenditure on the good is small relative to one's budget.

Question 11

For each pair of items below, determine which product would have the higher price elasticity of demand (in absolute value).
a. Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair colouring product
b. A new Ford Fusion or a tank of gas for your current car
c. A Seiko watch or watches in general

Accepted Answer

have many

Question 12

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula.

Accepted Answer

A)  2 
B)  1.25 
C)  0.9 
D)  0.75 
A)  2 
B)  1.25 
C)  0.9 
D)  0.75

Question 13

The price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?

Accepted Answer

A)  It falls by 162 per cent. 
B)  It rises by 1.62 per cent. 
C)  It falls. 
D)  It rises. 
A)  It falls by 162 per cent. 
B)  It rises by 1.62 per cent. 
C)  It falls. 
D)  It rises.

Question 14

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is

Accepted Answer

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

Question 15

Briefly explain the economic concept of elasticity.

Accepted Answer

Elasticity is a measure of how

Question 16

Price elasticity of demand measures

Accepted Answer

A)  how responsive suppliers are to price changes. 
B)  how responsive sales are to changes in the price of a related good. 
C)  how responsive quantity demanded is to a change in price. 
D)  how responsive sales are to a change in buyers' incomes. 
A)  how responsive suppliers are to price changes. 
B)  how responsive sales are to changes in the price of a related good. 
C)  how responsive quantity demanded is to a change in price. 
D)  how responsive sales are to a change in buyers' incomes.

Question 17

Suppose you are considering buying stock in the stock market, and your objective is to maximise your net worth. Furthermore, your study of the market reveals that the economy will be slowing down over the next several months. Under these conditions, it would be best to purchase stock in companies that produce

Accepted Answer

A)  normal goods. 
B)  luxury goods. 
C)  inferior goods. 
D)  price elastic goods. 
A)  normal goods. 
B)  luxury goods. 
C)  inferior goods. 
D)  price elastic goods.

Question 18

A linear downward-sloping demand curve has price elasticities (in absolute values) that

Accepted Answer

A)  increase as price decreases. 
B)  remain constant along the demand curve. 
C)  decrease as price decreases. 
D)  are greater than or equal to 1. 
A)  increase as price decreases. 
B)  remain constant along the demand curve. 
C)  decrease as price decreases. 
D)  are greater than or equal to 1.

Question 19

Barbara, the consummate hostess, proudly announced as she served dessert, 'A port is often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.' Evidently, Barbara views

Accepted Answer

A)  port and chocolate cake as luxury items. 
B)  port and chocolate cake as necessities. 
C)  port and chocolate cake as complementary goods. 
D)  port and chocolate cake as substitutes to other desserts. 
A)  port and chocolate cake as luxury items. 
B)  port and chocolate cake as necessities. 
C)  port and chocolate cake as complementary goods. 
D)  port and chocolate cake as substitutes to other desserts.

Question 20

Assume that you own a small boutique hotel. In an attempt to raise revenue you reduce your rates by 20 per cent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

Accepted Answer

A)  Boutique hotel rooms are inferior goods. 
B)  Demand is inelastic. 
C)  The demand curve for your hotel rooms is vertical. 
D)  Demand is elastic. 
A)  Boutique hotel rooms are inferior goods. 
B)  Demand is inelastic. 
C)  The demand curve for your hotel rooms is vertical. 
D)  Demand is elastic.

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing

When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic.

Consider the following types of demand curves: a. a vertical demand curve B. a horizontal demand curve C. a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Which of the following statements is true?

If, when price changes by 35 per cent, the quantity demanded changes by 7 per cent, then the absolute value of the price elasticity of demand is 5.

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula.

The price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is

Briefly explain the economic concept of elasticity.

Price elasticity of demand measures

A linear downward-sloping demand curve has price elasticities (in absolute values) that

Barbara, the consummate hostess, proudly announced as she served dessert, 'A port is often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.' Evidently, Barbara views

Assume that you own a small boutique hotel. In an attempt to raise revenue you reduce your rates by 20 per cent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

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

Exam 4: Elasticity: The Responsiveness of Demand and Supply

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing

When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic.

Consider the following types of demand curves: a. a vertical demand curve B. a horizontal demand curve C. a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Which of the following statements is true?

If, when price changes by 35 per cent, the quantity demanded changes by 7 per cent, then the absolute value of the price elasticity of demand is 5.

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula.

The price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is

Briefly explain the economic concept of elasticity.

Price elasticity of demand measures

A linear downward-sloping demand curve has price elasticities (in absolute values) that

Barbara, the consummate hostess, proudly announced as she served dessert, 'A port is often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.' Evidently, Barbara views

Assume that you own a small boutique hotel. In an attempt to raise revenue you reduce your rates by 20 per cent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

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