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

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

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 3

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Which of the following is not a determinant of a good's price elasticity of demand?

Accepted Answer

A) the slope of the demand curve 
B) the share of the good in the consumer's total budget 
C) whether the good is a luxury or a necessity 
D) the passage of time 
A) the slope of the demand curve 
B) the share of the good in the consumer's total budget 
C) whether the good is a luxury or a necessity 
D) the passage of time

Question 6

Suppose the supply of bicycles is price elastic.This means that

Accepted Answer

A) consumers will respond significantly to an increase in the quantity supplied of bicycles. 
B) suppliers will increase the quantity supplied of bicycles,but not immediately. 
C) suppliers face many substitutes for bicycles. 
D) suppliers will respond significantly to changes in the price of bicycles. 
A) consumers will respond significantly to an increase in the quantity supplied of bicycles. 
B) suppliers will increase the quantity supplied of bicycles,but not immediately. 
C) suppliers face many substitutes for bicycles. 
D) suppliers will respond significantly to changes in the price of bicycles.

Question 7

Last year,Joan bought 50 pounds of hamburger when her household income was $40 000.This year,her household income was only $30 000 and Joan bought 60 pounds 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 8

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

Accepted Answer

A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve. 
A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve.

Question 9

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 10

If demand is perfectly inelastic,the absolute value of the price elasticity coefficient is

Accepted Answer

A) infinity. 
B) zero. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve. 
A) infinity. 
B) zero. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve.

Question 11

Figure 4-1  
-Refer to Figure 4-1.A perfectly inelastic demand 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

If a good has a negative income elasticity of demand,this indicates that the good is

Accepted Answer

A) a substitute with another good. 
B) a complement with another good. 
C) inferior. 
D) normal. 
A) a substitute with another good. 
B) a complement with another good. 
C) inferior. 
D) normal.

Question 13

The current price of canvas messenger bags is $36 each,and sales of the bags equal 400 per week.If the price elasticity of demand is -2.5 and the price changes to $44,how many messenger bags will be sold per week? Use the midpoint formula.

Accepted Answer

Using the midpoint formula:
-2.5 = (400

Question 14

Which of the following items is likely to have the highest income elasticity of demand?

Accepted Answer

A) a luxury cruise to several European countries 
B) water 
C) breakfast cereal 
D) a hamburger 
A) a luxury cruise to several European countries 
B) water 
C) breakfast cereal 
D) a hamburger

Question 15

If the price elasticity of demand is unit-elastic,a 10 per cent increase in price will result in a 10 per cent increase in revenue.

Accepted Answer

A) True 
 B)False

Question 16

If the absolute value of the price elasticity of demand for DVD movies is 0.8,then the elasticity of demand for the DVD for the movie The Hangover should be

Accepted Answer

A) less then 0.8 in absolute value. 
B) greater than 0.8 in absolute value. 
C) equal to 1 in absolute value. 
D) equal to zero because the DVD of this movie has been out for several years. 
A) less then 0.8 in absolute value. 
B) greater than 0.8 in absolute value. 
C) equal to 1 in absolute value. 
D) equal to zero because the DVD of this movie has been out for several years.

Question 17

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

Accepted Answer

A) beer and spirits are complements;spirits and wine are luxuries. 
B) beer and spirits are normal goods;spirits and wine are luxuries. 
C) beer and spirits are complements;spirits are substitutes. 
D) beer and spirits are substitutes;spirits and wine are luxuries. 
A) beer and spirits are complements;spirits and wine are luxuries. 
B) beer and spirits are normal goods;spirits and wine are luxuries. 
C) beer and spirits are complements;spirits are substitutes. 
D) beer and spirits are substitutes;spirits and wine are luxuries.

Question 18

During an economic expansion,as consumer incomes rise,holding everything else constant,

Accepted Answer

A) the demand for most goods,except luxuries,will rise. 
B) the demand for luxuries will rise while the demand for inferior goods will fall. 
C) the demand for luxuries and inferior goods will rise. 
D) the prices of luxuries will fall while the prices of inferior goods will rise. 
A) the demand for most goods,except luxuries,will rise. 
B) the demand for luxuries will rise while the demand for inferior goods will fall. 
C) the demand for luxuries and inferior goods will rise. 
D) the prices of luxuries will fall while the prices of inferior goods will rise.

Question 19

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 20

Figure 4-4  
-Refer to Figure 4-4.At the midpoint of the demand curve,in absolute value

Accepted Answer

A) the price elasticity coefficient is at a maximum. 
B) the price elasticity coefficient is at a minimum. 
C) the price elasticity coefficient is zero. 
D) the price elasticity coefficient is one. 
A) the price elasticity coefficient is at a maximum. 
B) the price elasticity coefficient is at a minimum. 
C) the price elasticity coefficient is zero. 
D) the price elasticity coefficient is one.

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

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

The price elasticity of supply is calculated as the change in supply divided by the change in price.

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

Which of the following is not a determinant of a good's price elasticity of demand?

Suppose the supply of bicycles is price elastic.This means that

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

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

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 demand is perfectly inelastic,the absolute value of the price elasticity coefficient is

Figure 4-1 -Refer to Figure 4-1.A perfectly inelastic demand curve is shown in

If a good has a negative income elasticity of demand,this indicates that the good is

The current price of canvas messenger bags is $36 each,and sales of the bags equal 400 per week.If the price elasticity of demand is -2.5 and the price changes to $44,how many messenger bags will be sold per week? Use the midpoint formula.

Which of the following items is likely to have the highest income elasticity of demand?

If the price elasticity of demand is unit-elastic,a 10 per cent increase in price will result in a 10 per cent increase in revenue.

If the absolute value of the price elasticity of demand for DVD movies is 0.8,then the elasticity of demand for the DVD for the movie The Hangover should be

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

During an economic expansion,as consumer incomes rise,holding everything else constant,

Figure 4-4 -Refer to Figure 4-4.At the midpoint of the demand curve,in absolute value

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

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets 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

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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

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

The price elasticity of supply is calculated as the change in supply divided by the change in price.

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

Which of the following is not a determinant of a good's price elasticity of demand?

Suppose the supply of bicycles is price elastic.This means that

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

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

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 demand is perfectly inelastic,the absolute value of the price elasticity coefficient is

Figure 4-1 -Refer to Figure 4-1.A perfectly inelastic demand curve is shown in

If a good has a negative income elasticity of demand,this indicates that the good is

The current price of canvas messenger bags is $36 each,and sales of the bags equal 400 per week.If the price elasticity of demand is -2.5 and the price changes to $44,how many messenger bags will be sold per week? Use the midpoint formula.

Which of the following items is likely to have the highest income elasticity of demand?

If the price elasticity of demand is unit-elastic,a 10 per cent increase in price will result in a 10 per cent increase in revenue.

If the absolute value of the price elasticity of demand for DVD movies is 0.8,then the elasticity of demand for the DVD for the movie The Hangover should be

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

During an economic expansion,as consumer incomes rise,holding everything else constant,

Figure 4-4 -Refer to Figure 4-4.At the midpoint of the demand curve,in absolute value

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

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets 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

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