Question 1

The income elasticity of demand for cars is estimated to be 5.5 in the short run. We can conclude that:

Accepted Answer

A)  when the price of cars reduces by 10 per cent, cars sales increase by 55 per cent. 
B)  when the price of cars rises by 10 per cent, cars sales increase by 55 per cent. 
C)  when income rises by 10 per cent, cars sales increase by 55 per cent. 
D)  when income rises by 10 per cent, cars sales increase by 5.5 per cent. 
A)  when the price of cars reduces by 10 per cent, cars sales increase by 55 per cent. 
B)  when the price of cars rises by 10 per cent, cars sales increase by 55 per cent. 
C)  when income rises by 10 per cent, cars sales increase by 55 per cent. 
D)  when income rises by 10 per cent, cars sales increase by 5.5 per cent. C

Question 2

The smaller the proportion of your income is spent on a good, the more likely it is to be:

Accepted Answer

A)  relatively inelastic. 
B)  highly elastic. 
C)  perfectly elastic. 
D)  unit elastic. 
A)  relatively inelastic. 
B)  highly elastic. 
C)  perfectly elastic. 
D)  unit elastic. A

Question 3

Along a straight-line demand curve, the elasticity of demand:

Accepted Answer

A)  is approximated by the slope of the curve. 
B)  is constant at every point on the curve. 
C)  is less elastic than along a non-linear demand curve. 
D)  becomes more inelastic as price falls. 
A)  is approximated by the slope of the curve. 
B)  is constant at every point on the curve. 
C)  is less elastic than along a non-linear demand curve. 
D)  becomes more inelastic as price falls. D

Question 4

Price elasticity of demand measures:

Accepted Answer

A)  the responsiveness of the quantity demanded of a good to a change in income. 
B)  the responsiveness of the quantity demanded of a good to a change in consumers'
Preferences. 
C)  the responsiveness of the quantity demanded of a good to a change in the price of that good. 
D)  the reduction in the quantity demanded of a good when the price of that good is reduced. 
A)  the responsiveness of the quantity demanded of a good to a change in income. 
B)  the responsiveness of the quantity demanded of a good to a change in consumers'
Preferences. 
C)  the responsiveness of the quantity demanded of a good to a change in the price of that good. 
D)  the reduction in the quantity demanded of a good when the price of that good is reduced.

Question 5

-Refer to Exhibit 5.2, Graph C. Using midpoint formula calculate elasticity of demand if price was reduced from $150 to $100.

Accepted Answer

A)  0.1. 
B)  0.3. 
C)  6. 
D)  2.5. 
A)  0.1. 
B)  0.3. 
C)  6. 
D)  2.5.

Question 6

Assuming the demand curve is more elastic (flatter) than the supply curve, which of the following is true?

Accepted Answer

A)  The full tax is always passed on to the consumer no matter how flat (elastic) the demand curve is. 
B)  The full tax is always passed on to the seller no matter how flat (elastic) the demand curve is. 
C)  A smaller portion of sales tax is passed on to the consumer. 
D)  It does not make any difference how flat (elastic) the demand curve is; the tax is always split evenly between buyer and seller. 
A)  The full tax is always passed on to the consumer no matter how flat (elastic) the demand curve is. 
B)  The full tax is always passed on to the seller no matter how flat (elastic) the demand curve is. 
C)  A smaller portion of sales tax is passed on to the consumer. 
D)  It does not make any difference how flat (elastic) the demand curve is; the tax is always split evenly between buyer and seller.

Question 7

If the short-run price elasticity of demand for hospital care is 0.27, then the long-run price elasticity is expected to be:

Accepted Answer

A)  greater than 0.27. 
B)  greater than 1. 
C)  less than 0.27. 
D)  equal to 0.27. 
A)  greater than 0.27. 
B)  greater than 1. 
C)  less than 0.27. 
D)  equal to 0.27.

Question 8

Using supply and demand analysis, which of the following is true?

Accepted Answer

A)  The burden of a tax on production cannot be determined on the basis of who actually pays the tax. 
B)  The burden of a tax on production is always split evenly between consumers and sellers. 
C)  Consumers bear the entire burden of a per unit tax on production. 
D)  Sellers bear the entire burden of a per unit tax on production. 
A)  The burden of a tax on production cannot be determined on the basis of who actually pays the tax. 
B)  The burden of a tax on production is always split evenly between consumers and sellers. 
C)  Consumers bear the entire burden of a per unit tax on production. 
D)  Sellers bear the entire burden of a per unit tax on production.

Question 9

Applying supply and demand analysis, with other factors held constant, the steeper the supply curve (more inelastic), the larger the burden of a sales tax that is borne by the sellers.

Accepted Answer

A) True 
 B)False

Question 10

Price elasticity of demand can be:

Accepted Answer

A)  greater than 100 per cent. 
B)  equal to 100 per cent. 
C)  less than 1. 
D)  less than 100 per cent. 
A)  greater than 100 per cent. 
B)  equal to 100 per cent. 
C)  less than 1. 
D)  less than 100 per cent.

Question 11

Narrbegin Exhibit 5.1 Demand curves   
-In Exhibit 5.1, the demand curve between points b and c is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unit elastic. 
D)  perfectly elastic. 
A)  price elastic. 
B)  price inelastic. 
C)  unit elastic. 
D)  perfectly elastic.

Question 12

A horizontal demand curve indicates perfectly elastic demand.

Accepted Answer

A) True 
 B)False

Question 13

In the long run, price elasticities of demand are usually:

Accepted Answer

A)  less than they are in the short run because people can adjust. 
B)  the same as they are in the short run because tastes don't change. 
C)  greater than they are in the short run because prices rise over time. 
D)  greater than they are in the short run because consumers have time to adjust. 
A)  less than they are in the short run because people can adjust. 
B)  the same as they are in the short run because tastes don't change. 
C)  greater than they are in the short run because prices rise over time. 
D)  greater than they are in the short run because consumers have time to adjust.

Question 14

A health club sells 100 memberships when the monthly price is $70 and 120 memberships when the monthly price is $60. The price elasticity of demand for memberships at this health club is (using the midpoint formula):

Accepted Answer

A)  0.25. 
B)  0.65. 
C)  1.18. 
D)  1. 
A)  0.25. 
B)  0.65. 
C)  1.18. 
D)  1.

Question 15

Which of the following goods is likely to have the most elastic demand curve?

Accepted Answer

A)  Tobacco products. 
B)  Petrol. 
C)  Medical care. 
D)  Honda automobiles. 
A)  Tobacco products. 
B)  Petrol. 
C)  Medical care. 
D)  Honda automobiles.

Question 16

If a farmer lowers the price of his product from $15 to $5 and finds that sales increase from 500 to 1000 units per week, then the demand for the farmer's product in this range is (assuming midpoint formula for price elasticity of demand):

Accepted Answer

A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic. 
A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic.

Question 17

Suppose the price of a bus ticket rises from $2.75 to $3 and the number of tickets sold falls from 10 000 to 8500, the price elasticity of demand is:

Accepted Answer

A)  elastic. 
B)  unitary elastic. 
C)  perfectly elastic. 
D)  inelastic. 
A)  elastic. 
B)  unitary elastic. 
C)  perfectly elastic. 
D)  inelastic.

Question 18

Which of the following statements is not true?

Accepted Answer

A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good
Or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low. 
A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good
Or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low.

Question 19

If the price elasticity of demand for a product measures 0.45, then:

Accepted Answer

A)  this good has many available substitutes. 
B)  this good must be a non-essential good. 
C)  this good is a high-priced good. 
D)  this good is demand price inelastic. 
A)  this good has many available substitutes. 
B)  this good must be a non-essential good. 
C)  this good is a high-priced good. 
D)  this good is demand price inelastic.

Question 20

The income elasticity of demand:

Accepted Answer

A)  can only be zero or unity. 
B)  can only be positive. 
C)  can only be negative. 
D)  can be positive or negative. 
A)  can only be zero or unity. 
B)  can only be positive. 
C)  can only be negative. 
D)  can be positive or negative.

The income elasticity of demand for cars is estimated to be 5.5 in the short run. We can conclude that:

The smaller the proportion of your income is spent on a good, the more likely it is to be:

Along a straight-line demand curve, the elasticity of demand:

Price elasticity of demand measures:

-Refer to Exhibit 5.2, Graph C. Using midpoint formula calculate elasticity of demand if price was reduced from $150 to $100.

Assuming the demand curve is more elastic (flatter) than the supply curve, which of the following is true?

If the short-run price elasticity of demand for hospital care is 0.27, then the long-run price elasticity is expected to be:

Using supply and demand analysis, which of the following is true?

Applying supply and demand analysis, with other factors held constant, the steeper the supply curve (more inelastic), the larger the burden of a sales tax that is borne by the sellers.

Price elasticity of demand can be:

Narrbegin Exhibit 5.1 Demand curves -In Exhibit 5.1, the demand curve between points b and c is:

A horizontal demand curve indicates perfectly elastic demand.

In the long run, price elasticities of demand are usually:

A health club sells 100 memberships when the monthly price is $70 and 120 memberships when the monthly price is $60. The price elasticity of demand for memberships at this health club is (using the midpoint formula):

Which of the following goods is likely to have the most elastic demand curve?

If a farmer lowers the price of his product from $15 to $5 and finds that sales increase from 500 to 1000 units per week, then the demand for the farmer's product in this range is (assuming midpoint formula for price elasticity of demand):

Suppose the price of a bus ticket rises from $2.75 to $3 and the number of tickets sold falls from 10 000 to 8500, the price elasticity of demand is:

Which of the following statements is not true?

If the price elasticity of demand for a product measures 0.45, then:

The income elasticity of demand:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

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Exam 6: Elasticity of Demand and Supply

The income elasticity of demand for cars is estimated to be 5.5 in the short run. We can conclude that:

The smaller the proportion of your income is spent on a good, the more likely it is to be:

Along a straight-line demand curve, the elasticity of demand:

Price elasticity of demand measures:

-Refer to Exhibit 5.2, Graph C. Using midpoint formula calculate elasticity of demand if price was reduced from $150 to $100.

Assuming the demand curve is more elastic (flatter) than the supply curve, which of the following is true?

If the short-run price elasticity of demand for hospital care is 0.27, then the long-run price elasticity is expected to be:

Using supply and demand analysis, which of the following is true?

Applying supply and demand analysis, with other factors held constant, the steeper the supply curve (more inelastic), the larger the burden of a sales tax that is borne by the sellers.

Price elasticity of demand can be:

Narrbegin Exhibit 5.1 Demand curves -In Exhibit 5.1, the demand curve between points b and c is:

A horizontal demand curve indicates perfectly elastic demand.

In the long run, price elasticities of demand are usually:

A health club sells 100 memberships when the monthly price is $70 and 120 memberships when the monthly price is $60. The price elasticity of demand for memberships at this health club is (using the midpoint formula):

Which of the following goods is likely to have the most elastic demand curve?

If a farmer lowers the price of his product from $15 to $5 and finds that sales increase from 500 to 1000 units per week, then the demand for the farmer's product in this range is (assuming midpoint formula for price elasticity of demand):

Suppose the price of a bus ticket rises from $2.75 to $3 and the number of tickets sold falls from 10 000 to 8500, the price elasticity of demand is:

Which of the following statements is not true?

If the price elasticity of demand for a product measures 0.45, then:

The income elasticity of demand:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters