Question 1

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

Question 2

Figure 4.5  
-Refer to Figure 4.5.What does the section of the demand curve labelled 'A' represent?

Accepted Answer

A)  The inelastic section of the demand curve 
B)  The unit-elastic section of the demand curve 
C)  The elastic section of the demand curve 
D)  The perfectly elastic section of the demand curve 
A)  The inelastic section of the demand curve 
B)  The unit-elastic section of the demand curve 
C)  The elastic section of the demand curve 
D)  The perfectly elastic section of the demand curve

Question 3

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is ________.

Accepted Answer

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

Question 4

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximate change in the quantity supplied of teenage labour.

Accepted Answer

A)  7.3 per cent 
B)  14.4 per cent 
C)  25.5 per cent 
D)  There is insufficient information to answer the question. 
A)  7.3 per cent 
B)  14.4 per cent 
C)  25.5 per cent 
D)  There is insufficient information to answer the question.

Question 5

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

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 6

Briefly explain the economic concept of elasticity.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Elasticity is a measure of how

Question 7

A private school is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue,_________.

Accepted Answer

A)  it is assuming that the demand for attending the school is inelastic 
B)  it is assuming that the demand for attending the school is elastic 
C)  it is assuming that the demand for attending the school is unit-elastic 
D)  it is assuming that the demand for attending the school is perfectly elastic 
A)  it is assuming that the demand for attending the school is inelastic 
B)  it is assuming that the demand for attending the school is elastic 
C)  it is assuming that the demand for attending the school is unit-elastic 
D)  it is assuming that the demand for attending the school is perfectly elastic

Question 8

Suppose the value of the price elasticity of supply is 4.What does this mean?

Accepted Answer

A)  A 4 per cent increase in the price of the good causes quantity supplied to increase by 1 per cent. 
B)  A 1 per cent increase in the price of the good causes the supply curve to shift upward by 4 per cent. 
C)  A 1 per cent increase in the price of the good causes quantity supplied to increase by 4 per cent. 
D)  For every $1 increase in price, quantity supplied increases by 4 units. 
A)  A 4 per cent increase in the price of the good causes quantity supplied to increase by 1 per cent. 
B)  A 1 per cent increase in the price of the good causes the supply curve to shift upward by 4 per cent. 
C)  A 1 per cent increase in the price of the good causes quantity supplied to increase by 4 per cent. 
D)  For every $1 increase in price, quantity supplied increases by 4 units.

Question 9

Suppose a 4 per cent increase in price results in a 2 per cent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterise the product.

Accepted Answer

A)  2; the product is elastic. 
B)  0.2; the product is inelastic. 
C)  0.5; the product is inelastic. 
D)  50%; the product is inelastic. 
A)  2; the product is elastic. 
B)  0.2; the product is inelastic. 
C)  0.5; the product is inelastic. 
D)  50%; the product is inelastic.

Question 10

Economists estimated that the price elasticity of beer is −0.30 and the income elasticity of beer is 0.09.This means that________.

Accepted Answer

A)  an increase in the price of beer will increase the quantity demanded of beer, and beer is a normal good 
B)  an increase in the price of beer will lead to an increase in revenue for beer sellers, and beer is a normal good 
C)  a decrease in the price of beer will lead to an increase in revenue for beer sellers, and beer is an inferior good 
D)  an increase in the price of beer will lead to a decrease in the quantity demanded of beer, and beer is a necessity 
A)  an increase in the price of beer will increase the quantity demanded of beer, and beer is a normal good 
B)  an increase in the price of beer will lead to an increase in revenue for beer sellers, and beer is a normal good 
C)  a decrease in the price of beer will lead to an increase in revenue for beer sellers, and beer is an inferior good 
D)  an increase in the price of beer will lead to a decrease in the quantity demanded of beer, and beer is a necessity

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

When demand is unit-elastic,a change in price causes total revenue to stay the same because _______.

Accepted Answer

A)  the percentage change in quantity demanded exactly offsets the percentage change in price 
B)  buyers are buying the same quantity 
C)  total revenue never changes with price changes 
D)  the change in profit is offset by the change in production cost 
A)  the percentage change in quantity demanded exactly offsets the percentage change in price 
B)  buyers are buying the same quantity 
C)  total revenue never changes with price changes 
D)  the change in profit is offset by the change in production cost

Question 13

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded,then the demand for golf balls is ________.

Accepted Answer

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

Figure 4.7  
-Refer to Figure 4.7.A perfectly 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 16

The price elasticity of supply is usually a positive number because ________.

Accepted Answer

A)  quantity supplied increases in response to income increases 
B)  quantity supplied increases in response to price increases 
C)  the quantity demanded usually rises when price falls, and therefore suppliers would want to capitalise on this increase in demand 
D)  price rises when supply increases 
A)  quantity supplied increases in response to income increases 
B)  quantity supplied increases in response to price increases 
C)  the quantity demanded usually rises when price falls, and therefore suppliers would want to capitalise on this increase in demand 
D)  price rises when supply increases

Question 17

Linesha,a university student working part time,receives a wage increase.An avid movie buff,she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,________.

Accepted Answer

A)  DVDs and Blu-ray discs are substitutes 
B)  Blu-ray discs are normal goods and DVDs are inferior goods 
C)  DVDs and Blu-ray discs are normal goods 
D)  the cross-price elasticity between DVDs and Blu-ray discs is negative 
A)  DVDs and Blu-ray discs are substitutes 
B)  Blu-ray discs are normal goods and DVDs are inferior goods 
C)  DVDs and Blu-ray discs are normal goods 
D)  the cross-price elasticity between DVDs and Blu-ray discs is negative

Question 18

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Accepted Answer

A)  The quantity demanded and total revenue remain the same. 
B)  The quantity demanded does not change, but total revenue increases. 
C)  The quantity demanded and total revenue fall to zero. 
D)  The quantity demanded does not change, but total revenue decreases. 
A)  The quantity demanded and total revenue remain the same. 
B)  The quantity demanded does not change, but total revenue increases. 
C)  The quantity demanded and total revenue fall to zero. 
D)  The quantity demanded does not change, but total revenue decreases.

Question 19

Suppose the value of the price elasticity of demand is −3.This means that________.

Accepted Answer

A)  a 1 per cent increase in the price of the good causes quantity demanded to increase by 3 per cent. 
B)  a 1 per cent increase in the price of the good causes quantity demanded to decrease by 3 per cent. 
C)  a 3 per cent increase in the price of the good causes quantity demanded to decrease by 1 per cent. 
D)  a $1 increase in price causes quantity demanded to fall by 3 units. 
A)  a 1 per cent increase in the price of the good causes quantity demanded to increase by 3 per cent. 
B)  a 1 per cent increase in the price of the good causes quantity demanded to decrease by 3 per cent. 
C)  a 3 per cent increase in the price of the good causes quantity demanded to decrease by 1 per cent. 
D)  a $1 increase in price causes quantity demanded to fall by 3 units.

Question 20

What does income elasticity measure?

Accepted Answer

A)  How a good's quantity demanded responds to change in the good's price 
B)  How a good's quantity demanded responds to change in the price of another good 
C)  How a good's quantity demanded responds to change in buyers' incomes 
D)  How a good's quantity demanded responds to producers' incomes 
A)  How a good's quantity demanded responds to change in the good's price 
B)  How a good's quantity demanded responds to change in the price of another good 
C)  How a good's quantity demanded responds to change in buyers' incomes 
D)  How a good's quantity demanded responds to producers' incomes

The price elasticity of an upward-sloping supply curve is always________.

Figure 4.5 -Refer to Figure 4.5.What does the section of the demand curve labelled 'A' represent?

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is ________.

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximate change in the quantity supplied of teenage labour.

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

Briefly explain the economic concept of elasticity. __________________________________________________________________________________________________________________________________________________________________________________________

A private school is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue,_________.

Suppose the value of the price elasticity of supply is 4.What does this mean?

Suppose a 4 per cent increase in price results in a 2 per cent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterise the product.

Economists estimated that the price elasticity of beer is −0.30 and the income elasticity of beer is 0.09.This means that________.

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

When demand is unit-elastic,a change in price causes total revenue to stay the same because _______.

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded,then the demand for golf balls is ________.

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

Figure 4.7 -Refer to Figure 4.7.A perfectly elastic supply curve is shown in _______.

The price elasticity of supply is usually a positive number because ________.

Linesha,a university student working part time,receives a wage increase.An avid movie buff,she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,________.

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Suppose the value of the price elasticity of demand is −3.This means that________.

What does income elasticity measure?

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

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Exam 4: Elasticity: The Responsiveness of Demand and Supply

The price elasticity of an upward-sloping supply curve is always________.

Figure 4.5 -Refer to Figure 4.5.What does the section of the demand curve labelled 'A' represent?

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is ________.

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximate change in the quantity supplied of teenage labour.

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

Briefly explain the economic concept of elasticity. __________________________________________________________________________________________________________________________________________________________________________________________

A private school is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue,_________.

Suppose the value of the price elasticity of supply is 4.What does this mean?

Suppose a 4 per cent increase in price results in a 2 per cent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterise the product.

Economists estimated that the price elasticity of beer is −0.30 and the income elasticity of beer is 0.09.This means that________.

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

When demand is unit-elastic,a change in price causes total revenue to stay the same because _______.

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded,then the demand for golf balls is ________.

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

Figure 4.7 -Refer to Figure 4.7.A perfectly elastic supply curve is shown in _______.

The price elasticity of supply is usually a positive number because ________.

Linesha,a university student working part time,receives a wage increase.An avid movie buff,she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,________.

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Suppose the value of the price elasticity of demand is −3.This means that________.

What does income elasticity measure?

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