Question 1

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 2

Figure 4.9  
-Refer to Figure 4.9.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Accepted Answer

A)  SB represents supply in the short run, and SA represents supply in the long run. 
B)  Either SA or SB could represent supply in the short run; in the long run, the supply curve must be a vertical line. 
C)  Either SA or SB could represent supply in the long run; in the short run, the supply curve must be a horizontal line. 
D)  SA represents supply in the short run, and SB represents supply in the long run. 
A)  SB represents supply in the short run, and SA represents supply in the long run. 
B)  Either SA or SB could represent supply in the short run; in the long run, the supply curve must be a vertical line. 
C)  Either SA or SB could represent supply in the long run; in the short run, the supply curve must be a horizontal line. 
D)  SA represents supply in the short run, and SB represents supply in the long run.

Question 3

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 4

Last year,Joan bought 50 kilograms of hamburger when her household income was $40 000.This year,her household income was only $30 000 and Joan bought 60 kilograms of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is ________.

Accepted Answer

A)  positive, so Joan considers hamburger to be an inferior good 
B)  negative, so Joan considers hamburger to be an inferior good 
C)  positive, so Joan considers hamburger to be a normal good and a necessity 
D)  negative, so Joan considers hamburger to be a normal good 
A)  positive, so Joan considers hamburger to be an inferior good 
B)  negative, so Joan considers hamburger to be an inferior good 
C)  positive, so Joan considers hamburger to be a normal good and a necessity 
D)  negative, so Joan considers hamburger to be a normal good

Question 5

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 6

Figure 4.6  
-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

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 8

The price elasticity of supply for umbrellas is 2.Suppose you are told that following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?

Accepted Answer

A)  60 per cent 
B)  15 per cent 
C)  6.7 per cent 
D)  Impossible to determine without additional information 
A)  60 per cent 
B)  15 per cent 
C)  6.7 per cent 
D)  Impossible to determine without additional information

Question 9

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 10

The product below which comes closest to having a perfectly inelastic demand is ________.

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 11

Figure 4.7  
-Refer to Figure 4.7.A unit-elastic supply curve is shown in ________.

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 12

Figure 4.3  
-Refer to Figure 4.3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

Accepted Answer

A)  0.32 
B)  0.4 
C)  2.5 
D)  3.125 
A)  0.32 
B)  0.4 
C)  2.5 
D)  3.125

Question 13

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 14

What would be the cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a mobile phone provider?

Accepted Answer

A)  Positive if subscribers consider the services substitutes for each other 
B)  Positive if subscribers consider the services complements to each other 
C)  Negative if subscribers consider the services substitutes for each other 
D)  Negative no matter if subscribers consider the services substitutes or complements for each other 
A)  Positive if subscribers consider the services substitutes for each other 
B)  Positive if subscribers consider the services complements to each other 
C)  Negative if subscribers consider the services substitutes for each other 
D)  Negative no matter if subscribers consider the services substitutes or complements for each other

Question 15

What concept do economists use to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price?

Accepted Answer

A)  Slope 
B)  Efficiency 
C)  Relativity 
D)  Elasticity 
A)  Slope 
B)  Efficiency 
C)  Relativity 
D)  Elasticity

Question 16

The price elasticity of demand for Stork ice cream is −4.Suppose you are told that following a price increase,quantity demanded fell by 10 per cent.What was the percentage change in price that brought about this change in quantity demanded?

Accepted Answer

A)  40 per cent 
B)  25 per cent 
C)  2.5 per cent 
D)  0.4 per cent 
A)  40 per cent 
B)  25 per cent 
C)  2.5 per cent 
D)  0.4 per cent

Question 17

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 18

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 19

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

Question 20

Supply is elastic whenever the elasticity value for supply is positive and greater than 1.

Accepted Answer

A) True 
 B)False

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

Figure 4.9 -Refer to Figure 4.9.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

To calculate the price elasticity of demand we divide________.

Last year,Joan bought 50 kilograms of hamburger when her household income was $40 000.This year,her household income was only $30 000 and Joan bought 60 kilograms of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is ________.

Figure 4.6 -Refer to Figure 4.6.As price falls from P_A to P_B,the quantity demanded increases most along D₁_;therefore,_________.

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.

The price elasticity of supply for umbrellas is 2.Suppose you are told that following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?

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

The product below which comes closest to having a perfectly inelastic demand is ________.

Figure 4.7 -Refer to Figure 4.7.A unit-elastic supply curve is shown in ________.

Figure 4.3 -Refer to Figure 4.3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

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

What would be the cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a mobile phone provider?

What concept do economists use to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price?

The price elasticity of demand for Stork ice cream is −4.Suppose you are told that following a price increase,quantity demanded fell by 10 per cent.What was the percentage change in price that brought about this change in quantity demanded?

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

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 ________.

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

Supply is elastic whenever the elasticity value for supply is positive and greater than 1.

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

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

Figure 4.9 -Refer to Figure 4.9.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

To calculate the price elasticity of demand we divide________.

Last year,Joan bought 50 kilograms of hamburger when her household income was $40 000.This year,her household income was only $30 000 and Joan bought 60 kilograms of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is ________.

Figure 4.6 -Refer to Figure 4.6.As price falls from PA to PB,the quantity demanded increases most along D1; therefore,_________.

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.

The price elasticity of supply for umbrellas is 2.Suppose you are told that following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?

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

The product below which comes closest to having a perfectly inelastic demand is ________.

Figure 4.7 -Refer to Figure 4.7.A unit-elastic supply curve is shown in ________.

Figure 4.3 -Refer to Figure 4.3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

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

What would be the cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a mobile phone provider?

What concept do economists use to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price?

The price elasticity of demand for Stork ice cream is −4.Suppose you are told that following a price increase,quantity demanded fell by 10 per cent.What was the percentage change in price that brought about this change in quantity demanded?

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

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 ________.

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

Supply is elastic whenever the elasticity value for supply is positive and greater than 1.

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

Figure 4.6 -Refer to Figure 4.6.As price falls from P_A to P_B,the quantity demanded increases most along D₁_;therefore,_________.