Question 1

Cars have higher price elasticity of demand than tyres and tubes because:

Accepted Answer

A)  tyres and tubes and cars are substitutes. 
B)  tyres and tubes and cars are complements. 
C)  cars are a luxury and tyres and tubes are a necessity. 
D)  tyres and tubes are a luxury and cars are a necessity. 
A)  tyres and tubes and cars are substitutes. 
B)  tyres and tubes and cars are complements. 
C)  cars are a luxury and tyres and tubes are a necessity. 
D)  tyres and tubes are a luxury and cars are a necessity.

Question 2

The less important the good is in everyday consumption and the less the percentage of a budget that is spent on the good:

Accepted Answer

A)  the greater will be the price elasticity of the good. 
B)  the greater will be the effect of the price increase on the decrease in the demand. 
C)  the smaller will be the price elasticity of the good. 
D)  the smaller will be the effect of the price increase on the increase in the demand. 
A)  the greater will be the price elasticity of the good. 
B)  the greater will be the effect of the price increase on the decrease in the demand. 
C)  the smaller will be the price elasticity of the good. 
D)  the smaller will be the effect of the price increase on the increase in the demand.

Question 3

Suppose that when the price of a good is $10, quantity supplied is 20 and when the price is $6, quantity supplied is 12. The price elasticity of supply (measured by point elasticity method) is:

Accepted Answer

A)  0.5. 
B)  0.8. 
C)  1. 
D)  1.5. 
A)  0.5. 
B)  0.8. 
C)  1. 
D)  1.5.

Question 4

-Refer to Exhibit 5.2, Graph D. Using midpoint formula calculate elasticity of demand if price was reduced from $200 to $50.

Accepted Answer

A)  2.03. 
B)  0.67. 
C)  0.33. 
D)  2.54. 
A)  2.03. 
B)  0.67. 
C)  0.33. 
D)  2.54.

Question 5

If the managers of a bus system find that revenues increase when fares are raised, they would conclude that price elasticity demand for a subway service is inelastic.

Accepted Answer

A) True 
 B)False

Question 6

Narrbegin Exhibit 5.4 Supply and demand curves for cigarettes   
-As shown in Exhibit 5.4, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by consumers of a pack of cigarettes is:

Accepted Answer

A)  zero. 
B)  25 per cent. 
C)  50 per cent. 
D)  100 per cent. 
A)  zero. 
B)  25 per cent. 
C)  50 per cent. 
D)  100 per cent.

Question 7

If the price elasticity of supply equals zero, this implies that:

Accepted Answer

A)  suppliers can easily change the quantity supplied of the product as the price of the product changes. 
B)  the period under consideration is a very long time period. 
C)  the supply curve is perfectly vertical. 
D)  the percentage change in quantity supplied exceeds the percentage change in product price. 
A)  suppliers can easily change the quantity supplied of the product as the price of the product changes. 
B)  the period under consideration is a very long time period. 
C)  the supply curve is perfectly vertical. 
D)  the percentage change in quantity supplied exceeds the percentage change in product price.

Question 8

If a straight-line demand curve slopes down, price elasticity (measured by point elasticity method) will not:

Accepted Answer

A)  remain the same at all points on the demand curve. 
B)  change between any two points along the demand curve. 
C)  always be greater than one. 
D)  always equal one. 
A)  remain the same at all points on the demand curve. 
B)  change between any two points along the demand curve. 
C)  always be greater than one. 
D)  always equal one.

Question 9

Narrbegin Exhibit 5.1 Demand curves   
-In Exhibit 5.1, between points b and c, the price elasticity of demand measures

Accepted Answer

A)  4.27. 
B)  1.5. 
C)  1.56. 
D)  0.636. 
A)  4.27. 
B)  1.5. 
C)  1.56. 
D)  0.636.

Question 10

Narrbegin Exhibit 5.1 Demand curves   
-In Exhibit 5.1, between points a and b, the price elasticity of demand measures:

Accepted Answer

A)  0.67. 
B)  1.5. 
C) 2. 
D)  1. 
A)  0.67. 
B)  1.5. 
C) 2. 
D)  1.

Question 11

The price elasticity of demand coefficient for a good will be greater:

Accepted Answer

A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short run. 
D)  if a small portion of the budget will be spent on it. 
A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short run. 
D)  if a small portion of the budget will be spent on it.

Question 12

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

Accepted Answer

A)  collect less revenue from short-notice travellers. 
B)  collect more revenue from travellers who book well in advance. 
C)  lose money on short-notice travellers. 
D)  collect less revenue from travellers who book well in advance. 
A)  collect less revenue from short-notice travellers. 
B)  collect more revenue from travellers who book well in advance. 
C)  lose money on short-notice travellers. 
D)  collect less revenue from travellers who book well in advance.

Question 13

The number of satellite dishes increased by 50 per cent when the average monthly price of cable television increased by 10 per cent. Assuming that other factors are held constant, satellite dishes and cable television are classified as:

Accepted Answer

A)  complements. 
B)  unrelated goods. 
C)  substitutes. 
D)  social goods. 
A)  complements. 
B)  unrelated goods. 
C)  substitutes. 
D)  social goods.

Question 14

Narrbegin Exhibit 5.3 Supply and demand curves for good X   
-As shown in Exhibit 5.3, the price elasticity of supply for good X between points E and X is:

Accepted Answer

A)  0.125. 
B)  1 
C)  1.352 
D)  .714 
A)  0.125. 
B)  1 
C)  1.352 
D)  .714

Question 15

Any downward-sloping straight line demand curve displays:

Accepted Answer

A)  elastic and inelastic demand. 
B)  positive and strong demand. 
C)  elastic, inelastic and negligible demand. 
D)  elastic, inelastic and unitary elastic demand. 
A)  elastic and inelastic demand. 
B)  positive and strong demand. 
C)  elastic, inelastic and negligible demand. 
D)  elastic, inelastic and unitary elastic demand.

Question 16

Using the midpoint formula, what would be the price elasticity of demand for a gallbladder operation if the number of operations fell from 7000 to 4000 per week after its price increased from $6000 to $15 000?

Accepted Answer

A)  0.254. 
B)  0.636. 
C)  0.801. 
D)  1.25. 
A)  0.254. 
B)  0.636. 
C)  0.801. 
D)  1.25.

Question 17

The income elasticity of demand for shoes is estimated to be 1.5. We can conclude that shoes:

Accepted Answer

A)  have a relatively steep demand curve. 
B)  have a relatively flat demand curve. 
C)  are a normal good. 
D)  are an inferior good. 
A)  have a relatively steep demand curve. 
B)  have a relatively flat demand curve. 
C)  are a normal good. 
D)  are an inferior good.

Question 18

The straight line demand curve represents the price elasticity of demand that:

Accepted Answer

A)  increases as the price decreases. 
B)  decreases as the price decreases. 
C)  increases as the price increases. 
D)  decreases as the price increases. 
A)  increases as the price decreases. 
B)  decreases as the price decreases. 
C)  increases as the price increases. 
D)  decreases as the price increases.

Question 19

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

Accepted Answer

A)  is unitary elastic. 
B)  is more elastic as the price falls. 
C)  is different at every point along the curve. 
D)  is perfectly elastic. 
A)  is unitary elastic. 
B)  is more elastic as the price falls. 
C)  is different at every point along the curve. 
D)  is perfectly elastic.

Question 20

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

Accepted Answer

A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve.

Cars have higher price elasticity of demand than tyres and tubes because:

The less important the good is in everyday consumption and the less the percentage of a budget that is spent on the good:

Suppose that when the price of a good is $10, quantity supplied is 20 and when the price is $6, quantity supplied is 12. The price elasticity of supply (measured by point elasticity method) is:

-Refer to Exhibit 5.2, Graph D. Using midpoint formula calculate elasticity of demand if price was reduced from $200 to $50.

If the managers of a bus system find that revenues increase when fares are raised, they would conclude that price elasticity demand for a subway service is inelastic.

Narrbegin Exhibit 5.4 Supply and demand curves for cigarettes -As shown in Exhibit 5.4, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by consumers of a pack of cigarettes is:

If the price elasticity of supply equals zero, this implies that:

If a straight-line demand curve slopes down, price elasticity (measured by point elasticity method) will not:

Narrbegin Exhibit 5.1 Demand curves -In Exhibit 5.1, between points b and c, the price elasticity of demand measures

Narrbegin Exhibit 5.1 Demand curves -In Exhibit 5.1, between points a and b, the price elasticity of demand measures:

The price elasticity of demand coefficient for a good will be greater:

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

The number of satellite dishes increased by 50 per cent when the average monthly price of cable television increased by 10 per cent. Assuming that other factors are held constant, satellite dishes and cable television are classified as:

Narrbegin Exhibit 5.3 Supply and demand curves for good X -As shown in Exhibit 5.3, the price elasticity of supply for good X between points E and X is:

Any downward-sloping straight line demand curve displays:

Using the midpoint formula, what would be the price elasticity of demand for a gallbladder operation if the number of operations fell from 7000 to 4000 per week after its price increased from $6000 to $15 000?

The income elasticity of demand for shoes is estimated to be 1.5. We can conclude that shoes:

The straight line demand curve represents the price elasticity of demand that:

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

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

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

Cars have higher price elasticity of demand than tyres and tubes because:

The less important the good is in everyday consumption and the less the percentage of a budget that is spent on the good:

Suppose that when the price of a good is $10, quantity supplied is 20 and when the price is $6, quantity supplied is 12. The price elasticity of supply (measured by point elasticity method) is:

-Refer to Exhibit 5.2, Graph D. Using midpoint formula calculate elasticity of demand if price was reduced from $200 to $50.

If the managers of a bus system find that revenues increase when fares are raised, they would conclude that price elasticity demand for a subway service is inelastic.

Narrbegin Exhibit 5.4 Supply and demand curves for cigarettes -As shown in Exhibit 5.4, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by consumers of a pack of cigarettes is:

If the price elasticity of supply equals zero, this implies that:

If a straight-line demand curve slopes down, price elasticity (measured by point elasticity method) will not:

Narrbegin Exhibit 5.1 Demand curves -In Exhibit 5.1, between points b and c, the price elasticity of demand measures

Narrbegin Exhibit 5.1 Demand curves -In Exhibit 5.1, between points a and b, the price elasticity of demand measures:

The price elasticity of demand coefficient for a good will be greater:

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

The number of satellite dishes increased by 50 per cent when the average monthly price of cable television increased by 10 per cent. Assuming that other factors are held constant, satellite dishes and cable television are classified as:

Narrbegin Exhibit 5.3 Supply and demand curves for good X -As shown in Exhibit 5.3, the price elasticity of supply for good X between points E and X is:

Any downward-sloping straight line demand curve displays:

Using the midpoint formula, what would be the price elasticity of demand for a gallbladder operation if the number of operations fell from 7000 to 4000 per week after its price increased from $6000 to $15 000?

The income elasticity of demand for shoes is estimated to be 1.5. We can conclude that shoes:

The straight line demand curve represents the price elasticity of demand that:

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

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

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