Question 1

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then

Accepted Answer

A)  aspirin is a normal good. 
B)  the demand for aspirin is inelastic. 
C)  aspirin has few substitutes. 
D)  the demand for aspirin is elastic. 
A)  aspirin is a normal good. 
B)  the demand for aspirin is inelastic. 
C)  aspirin has few substitutes. 
D)  the demand for aspirin is elastic.

Question 2

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

Accepted Answer

A)  The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. 
B)  The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. 
C)  The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. 
D)  The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic. 
A)  The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. 
B)  The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. 
C)  The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. 
D)  The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.

Question 3

In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a key determinant of the price elasticity of supply?

Accepted Answer

A)  the slope of the supply curve 
B)  the availability of substitutes in production 
C)  the available technology 
D)  the time it takes to change output in response to a change in price 
A)  the slope of the supply curve 
B)  the availability of substitutes in production 
C)  the available technology 
D)  the time it takes to change output in response to a change in price

Question 5

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  inferior. 
D)  normal. 
A)  substitutes. 
B)  complements. 
C)  inferior. 
D)  normal.

Question 6

-Refer to Figure 4-6. As price falls from PA to PB, the quantity demanded increases most along D1; therefore,

Accepted Answer

A)  D1 is unit elastic. 
B)  D1 is more inelastic than D2 or D3. 
C)  D1 is more elastic than D2 or D3 
D)  D1 is elastic at PA but inelastic at PB. 
A)  D1 is unit elastic. 
B)  D1 is more inelastic than D2 or D3. 
C)  D1 is more elastic than D2 or D3 
D)  D1 is elastic at PA but inelastic at PB.

Question 7

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?

Accepted Answer

A)  The toothpaste industry is highly competitive. 
B)  Toothpaste is relatively inexpensive. 
C)  Toothpaste is heavily endorsed by dentists. 
D)  There are few close substitutes for toothpaste. 
A)  The toothpaste industry is highly competitive. 
B)  Toothpaste is relatively inexpensive. 
C)  Toothpaste is heavily endorsed by dentists. 
D)  There are few close substitutes for toothpaste.

Question 8

-Refer to Figure 4-4. The inelastic segment of the demand curve

Accepted Answer

A)  is coincident with the horizontal axis. 
B)  is coincident with the vertical axis. 
C)  lies below the midpoint of the curve. 
D)  lies above the midpoint of the curve. 
A)  is coincident with the horizontal axis. 
B)  is coincident with the vertical axis. 
C)  lies below the midpoint of the curve. 
D)  lies above the midpoint of the curve.

Question 9

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean?

Accepted Answer

A)  A 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption. 
B)  A 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption. 
C)  If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D)  The demand for orange juice is 6 times more than the demand for grapefruit juice. 
A)  A 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption. 
B)  A 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption. 
C)  If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D)  The demand for orange juice is 6 times more than the demand for grapefruit juice.

Question 10

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic. She argues 'I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor. If I wanted to buy a mystery novel I would have many authors to choose from. Therefore, the demand for mystery novels is more elastic than the demand for my textbook.' Is Jill correct?

Accepted Answer

A)  The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B)  She is correct. 
C)  She is confused. She should have concluded that the textbook has a more elastic demand than a novel. 
D)  She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards. Most people pay for novels and other books with cash or by check. 
A)  The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B)  She is correct. 
C)  She is confused. She should have concluded that the textbook has a more elastic demand than a novel. 
D)  She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards. Most people pay for novels and other books with cash or by check.

Question 11

-Refer to Figure 4-4. Which of the following statements is true about the price elasticity of demand?

Accepted Answer

A)  The elasticity coefficient is constant along the demand curve. 
B)  The elastic portion of a straight-line downward-sloping demand curve corresponds to the segment above the midpoint. 
C)  The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D)  At the midpoint of the demand curve, the elasticity coefficient is zero. 
A)  The elasticity coefficient is constant along the demand curve. 
B)  The elastic portion of a straight-line downward-sloping demand curve corresponds to the segment above the midpoint. 
C)  The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D)  At the midpoint of the demand curve, the elasticity coefficient is zero.

Question 12

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

Accepted Answer

A)  the price elasticity of demand for teapots is greater than 1 in absolute value. 
B)  the demand for teapots is unit-elastic. 
C)  the price elasticity of demand for teapots is equal to zero. 
D)  the price elasticity of demand for teapots is less than 1 in absolute value. 
A)  the price elasticity of demand for teapots is greater than 1 in absolute value. 
B)  the demand for teapots is unit-elastic. 
C)  the price elasticity of demand for teapots is equal to zero. 
D)  the price elasticity of demand for teapots is less than 1 in absolute value.

Question 13

To calculate the price elasticity of demand we divide

Accepted Answer

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

Question 14

A demand curve that is horizontal indicates that the commodity

Accepted Answer

A)  has few substitutes. 
B)  must be very cheap. 
C)  is a necessity. 
D)  has a large number of substitutes. 
A)  has few substitutes. 
B)  must be very cheap. 
C)  is a necessity. 
D)  has a large number of substitutes.

Question 15

The income elasticity of demand measures

Accepted Answer

A)  the responsiveness of quantity demanded to changes in income. 
B)  how a consumer's purchasing power is affected by a change in the price of a product. 
C)  the percentage change in the price of a product divided by the percentage change in consumer income. 
D)  the income effect of a change in price. 
A)  the responsiveness of quantity demanded to changes in income. 
B)  how a consumer's purchasing power is affected by a change in the price of a product. 
C)  the percentage change in the price of a product divided by the percentage change in consumer income. 
D)  the income effect of a change in price.

Question 16

In general, a 'big ticket item' such as a house or new car will

Accepted Answer

A)  tend to have a more elastic demand than a lower priced good. 
B)  tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget. 
C)  tend to have an inelastic demand because it has many substitutes. 
D)  tend to have a more inelastic demand the more time that passes. 
A)  tend to have a more elastic demand than a lower priced good. 
B)  tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget. 
C)  tend to have an inelastic demand because it has many substitutes. 
D)  tend to have a more inelastic demand the more time that passes.

Question 17

Which of the following could explain why the demand for table salt is inelastic?

Accepted Answer

A)  Salt is a luxury good. 
B)  Salt is a rare commodity. 
C)  Households devote a very small portion of their income to salt purchases. 
D)  Salt is a luxury for high income consumers but a necessity for low income consumers. 
A)  Salt is a luxury good. 
B)  Salt is a rare commodity. 
C)  Households devote a very small portion of their income to salt purchases. 
D)  Salt is a luxury for high income consumers but a necessity for low income consumers.

Question 18

If at a price of $10, a vendor sells 5 units of a product and at a price of $8, 6 units are sold, then, using the midpoint formula, the demand for this good is inelastic.

Accepted Answer

A) True 
 B)False

Question 19

The demand for petrol in the short run is

Accepted Answer

A)  elastic because people can easily switch to public transportation. 
B)  perfectly inelastic because people have no choice but to buy petrol. 
C)  unit-elastic because people tend to consume a stable amount of petrol per period. 
D)  inelastic because there are no good substitutes for petrol. 
A)  elastic because people can easily switch to public transportation. 
B)  perfectly inelastic because people have no choice but to buy petrol. 
C)  unit-elastic because people tend to consume a stable amount of petrol per period. 
D)  inelastic because there are no good substitutes for petrol.

Question 20

When demand is elastic, a fall in price causes total revenue to rise because

Accepted Answer

A)  when price falls, quantity sold increases so total revenue automatically rises. 
B)  the increase in quantity sold is large enough to offset the lower price. 
C)  the percentage increase in quantity demanded is less than the percentage fall in price. 
D)  the demand curve shifts. 
A)  when price falls, quantity sold increases so total revenue automatically rises. 
B)  the increase in quantity sold is large enough to offset the lower price. 
C)  the percentage increase in quantity demanded is less than the percentage fall in price. 
D)  the demand curve shifts.

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

Which of the following is a key determinant of the price elasticity of supply?

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

-Refer to Figure 4-6. As price falls from P_A to P_B, the quantity demanded increases most along D_1;therefore,

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?

-Refer to Figure 4-4. The inelastic segment of the demand curve

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean?

-Refer to Figure 4-4. Which of the following statements is true about the price elasticity of demand?

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

To calculate the price elasticity of demand we divide

A demand curve that is horizontal indicates that the commodity

The income elasticity of demand measures

In general, a 'big ticket item' such as a house or new car will

Which of the following could explain why the demand for table salt is inelastic?

If at a price of $10, a vendor sells 5 units of a product and at a price of $8, 6 units are sold, then, using the midpoint formula, the demand for this good is inelastic.

The demand for petrol in the short run is

When demand is elastic, a fall in price causes total revenue to rise because

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

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

Which of the following is a key determinant of the price elasticity of supply?

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

-Refer to Figure 4-6. As price falls from PA to PB, the quantity demanded increases most along D1; therefore,

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?

-Refer to Figure 4-4. The inelastic segment of the demand curve

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean?

-Refer to Figure 4-4. Which of the following statements is true about the price elasticity of demand?

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

To calculate the price elasticity of demand we divide

A demand curve that is horizontal indicates that the commodity

The income elasticity of demand measures

In general, a 'big ticket item' such as a house or new car will

Which of the following could explain why the demand for table salt is inelastic?

If at a price of $10, a vendor sells 5 units of a product and at a price of $8, 6 units are sold, then, using the midpoint formula, the demand for this good is inelastic.

The demand for petrol in the short run is

When demand is elastic, a fall in price causes total revenue to rise because

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

-Refer to Figure 4-6. As price falls from P_A to P_B, the quantity demanded increases most along D_1;therefore,