Question 1

The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

Accepted Answer

A) True 
 B)False  True

Question 2

Suppose a 4 per cent increase in income results in a 2 per cent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Income elasticity of demand = −0.5.The good is inferior.

Question 3

Which of the following statements is true?

Accepted Answer

A)  In general, if a product has few substitutes, it will have an elastic demand. 
B)  The more time that passes, the more inelastic the demand for a product becomes. 
C)  The demand curve for a necessity is more elastic than the demand curve for a luxury. 
D)  The more narrowly we define a market, the more elastic the demand for a product will be. 
A)  In general, if a product has few substitutes, it will have an elastic demand. 
B)  The more time that passes, the more inelastic the demand for a product becomes. 
C)  The demand curve for a necessity is more elastic than the demand curve for a luxury. 
D)  The more narrowly we define a market, the more elastic the demand for a product will be. D

Question 4

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

Accepted Answer

A) True 
 B)False

Question 5

If the price elasticity of demand for insulin is equal to zero,then what is the demand curve for insulin?

Accepted Answer

A)  Horizontal 
B)  Downward sloping 
C)  Curvilinear 
D)  Vertical 
A)  Horizontal 
B)  Downward sloping 
C)  Curvilinear 
D)  Vertical

Question 6

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.

Accepted Answer

A)  cross-price elasticity; positive number 
B)  cross-price elasticity; negative number 
C)  price elasticity of demand; number greater than 1 (in absolute value) 
D)  price elasticity of demand; number less than 1 (in absolute value) 
A)  cross-price elasticity; positive number 
B)  cross-price elasticity; negative number 
C)  price elasticity of demand; number greater than 1 (in absolute value) 
D)  price elasticity of demand; number less than 1 (in absolute value)

Question 7

In recent years,the prices of new domestically produced cars have been falling.Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel.This information suggests that the cross-price elasticity between new cars and used cars,and the cross-price elasticity between new cars and bus travel are negative.

Accepted Answer

A) True 
 B)False

Question 8

Seth is a competitive body builder.He says he has to have his 12 oz package of protein powder to 'feed his muscles' every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?

Accepted Answer

A)  It is elastic. 
B)  It is perfectly elastic. 
C)  It is perfectly inelastic. 
D)  The price elasticity coefficient is 0. 
A)  It is elastic. 
B)  It is perfectly elastic. 
C)  It is perfectly inelastic. 
D)  The price elasticity coefficient is 0.

Question 9

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 10

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Accepted Answer

A) True 
 B)False

Question 11

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 12

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

1.Availability of close substitutes: If

Question 13

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true?

Accepted Answer

A)  Whenever a firm raises its price, its total revenue will increase. 
B)  When a firm lowers its price, its total revenue may either increase or decrease. 
C)  Whenever a firm increases its quantity sold, its revenue will increase. 
D)  Total revenue will equal zero when the demand for a product is unit-elastic. 
A)  Whenever a firm raises its price, its total revenue will increase. 
B)  When a firm lowers its price, its total revenue may either increase or decrease. 
C)  Whenever a firm increases its quantity sold, its revenue will increase. 
D)  Total revenue will equal zero when the demand for a product is unit-elastic.

Question 15

If a firm is in an antitrust court case being accused of monopolising a product,what would the firm hire an economist to show?

Accepted Answer

A)  The cross-price elasticity of demand between the firm's good and another is negative. 
B)  The cross-price elasticity of demand between the firm's good and another is positive. 
C)  The price elasticity of demand for the firm's good is highly inelastic. 
D)  The income elasticity of the firm's good is inferior. 
A)  The cross-price elasticity of demand between the firm's good and another is negative. 
B)  The cross-price elasticity of demand between the firm's good and another is positive. 
C)  The price elasticity of demand for the firm's good is highly inelastic. 
D)  The income elasticity of the firm's good is inferior.

Question 16

What is the most important determinant of the price elasticity of demand for a good?

Accepted Answer

A)  The definition of the market for a good 
B)  The availability of substitutes for the good 
C)  The share of the good in the consumer's budget 
D)  Whether the good is a necessity or a luxury 
A)  The definition of the market for a good 
B)  The availability of substitutes for the good 
C)  The share of the good in the consumer's budget 
D)  Whether the good is a necessity or a luxury

Question 17

Price elasticity of supply is used to gauge________.

Accepted Answer

A)  how responsive suppliers are to price changes 
B)  how responsive suppliers are to changes in future prices 
C)  how responsive suppliers are to a change in demand 
D)  how responsive sales are to a change in input prices 
A)  how responsive suppliers are to price changes 
B)  how responsive suppliers are to changes in future prices 
C)  how responsive suppliers are to a change in demand 
D)  how responsive sales are to a change in input prices

Question 18

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 19

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by ______.

Accepted Answer

A)  1.5 per cent 
B)  15 per cent 
C)  approximately 25 per cent 
D)  approximately 5 per cent 
A)  1.5 per cent 
B)  15 per cent 
C)  approximately 25 per cent 
D)  approximately 5 per cent

Question 20

If a supply curve is a horizontal line,supply is said to be ______.

Accepted Answer

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

The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

Which of the following statements is true?

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

If the price elasticity of demand for insulin is equal to zero,then what is the demand curve for insulin?

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the and get a .

Seth is a competitive body builder.He says he has to have his 12 oz package of protein powder to 'feed his muscles' every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?

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________.

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

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

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Which of the following statements is true?

If a firm is in an antitrust court case being accused of monopolising a product,what would the firm hire an economist to show?

What is the most important determinant of the price elasticity of demand for a good?

Price elasticity of supply is used to gauge________.

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

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by ______.

If a supply curve is a horizontal line,supply is said to be ______.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 4: Elasticity: The Responsiveness of Demand and Supply

The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

Which of the following statements is true?

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

If the price elasticity of demand for insulin is equal to zero,then what is the demand curve for insulin?

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.

Seth is a competitive body builder.He says he has to have his 12 oz package of protein powder to 'feed his muscles' every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?

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________.

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

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

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Which of the following statements is true?

If a firm is in an antitrust court case being accused of monopolising a product,what would the firm hire an economist to show?

What is the most important determinant of the price elasticity of demand for a good?

Price elasticity of supply is used to gauge________.

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

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by ______.

If a supply curve is a horizontal line,supply is said to be ______.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the and get a .