Question 1

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  approach infinity. 
A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  approach infinity.

Question 2

The number of computers bought increased by 20 per cent when the price of online services declined by 10 per cent. Assuming other factors are held constant, computers and online services 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 3

The cross-elasticity of demand:

Accepted Answer

A)  reveals whether the good is income elastic. 
B)  reveals whether the good is a necessity. 
C)  reveals whether the good is important. 
D)  reveals whether the good is a substitute. 
A)  reveals whether the good is income elastic. 
B)  reveals whether the good is a necessity. 
C)  reveals whether the good is important. 
D)  reveals whether the good is a substitute.

Question 4

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation, the value of price elasticity of demand for Pepsi-Cola is:

Accepted Answer

A)  0.5. 
B)  0.25. 
C) 1. 
D)  3. 
A)  0.5. 
B)  0.25. 
C) 1. 
D)  3.

Question 5

Suppose that the quantity of apples sold increases by 30 per cent after the price of pears increases by 15 per cent. What is the coefficient of the cross elasticity of demand?

Accepted Answer

A)  3. 
B)  1.5. 
C)  0.2. 
D)  2. 
E)  0.3. 
A)  3. 
B)  1.5. 
C)  0.2. 
D)  2. 
E)  0.3.

Question 6

The elasticity of demand for food would most likely be:

Accepted Answer

A)  perfectly elastic. 
B)  unit elastic. 
C)  relatively more elastic than the elasticity of demand for bread. 
D)  perfectly inelastic. 
A)  perfectly elastic. 
B)  unit elastic. 
C)  relatively more elastic than the elasticity of demand for bread. 
D)  perfectly inelastic.

Question 7

The income elasticity coefficient is:

Accepted Answer

A)  important because we need to know the impact of recession on sales. 
B)  irrelevant because we cannot compute it. 
C)  too complicated and therefore is not widely used in economics. 
D)  never used to estimate the impact on inferior goods. 
A)  important because we need to know the impact of recession on sales. 
B)  irrelevant because we cannot compute it. 
C)  too complicated and therefore is not widely used in economics. 
D)  never used to estimate the impact on inferior goods.

Question 8

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 one percent change in price. 
D)  the reduction in the quantity demanded of a good when the price 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 one percent change in price. 
D)  the reduction in the quantity demanded of a good when the price is reduced.

Question 9

Price elasticity of supply measures the responsiveness of the quality of a supplied good to a change in price.

Accepted Answer

A) True 
 B)False

Question 10

The price elasticity of demand formula includes:

Accepted Answer

A)  percentage change in quantity demanded. 
B)  percentage change in quantity supplied. 
C)  difference in quantity demanded. 
D)  difference in price. 
A)  percentage change in quantity demanded. 
B)  percentage change in quantity supplied. 
C)  difference in quantity demanded. 
D)  difference in price.

Question 11

The major determinants of price elasticity of demand are:

Accepted Answer

A)  availability of complements. 
B)  availability of substitutes. 
C)  availability of normal goods. 
D)  availability of supply. 
A)  availability of complements. 
B)  availability of substitutes. 
C)  availability of normal goods. 
D)  availability of supply.

Question 12

If the demand is elastic, the total revenue test of price elasticity will show a/an:

Accepted Answer

A)  decrease in revenue and a price decrease. 
B)  increase in revenue and a price decrease. 
C)  increase in revenue and a price increase. 
D)  decrease in revenue and a price increase. 
A)  decrease in revenue and a price decrease. 
B)  increase in revenue and a price decrease. 
C)  increase in revenue and a price increase. 
D)  decrease in revenue and a price increase.

Question 13

The income elasticity of demand is the ratio of the percentage change in:

Accepted Answer

A)  the quality demanded of a good to the percentage change in income. 
B)  the quantity demanded of a good to the percentage change in income. 
C)  income to the percentage change in quantity demanded of a good. 
D)  the quantity demanded of a good to the percentage change in price. 
A)  the quality demanded of a good to the percentage change in income. 
B)  the quantity demanded of a good to the percentage change in income. 
C)  income to the percentage change in quantity demanded of a good. 
D)  the quantity demanded of a good to the percentage change in price.

Question 14

The price-elastic portion of the linear demand curve lies:

Accepted Answer

A)  in the high price range. 
B)  anywhere to the left of current market prices. 
C)  below the point where total revenue is maximised. 
D)  at the intersection with the supply curve. 
A)  in the high price range. 
B)  anywhere to the left of current market prices. 
C)  below the point where total revenue is maximised. 
D)  at the intersection with the supply curve.

Question 15

The price elasticity coefficient of demand is:

Accepted Answer

A)  negatively related to the percentage of one's budget spent on a good or service. 
B)  not related to the availability of good substitutes for a good or service. 
C)  related to the availability of good complements for a good or service. 
D)  higher the longer a price change persists. 
A)  negatively related to the percentage of one's budget spent on a good or service. 
B)  not related to the availability of good substitutes for a good or service. 
C)  related to the availability of good complements for a good or service. 
D)  higher the longer a price change persists.

Question 16

-Refer to Exhibit 5.2. Assume that a wealthy buyer, Mr Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5.2, which graph illustrates the shape of the demand curve for silver?

Accepted Answer

A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D. 
A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D.

Question 17

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:

Accepted Answer

A)  0.33. 
B)  2.33. 
C)  0.25. 
D)  3. 
A)  0.33. 
B)  2.33. 
C)  0.25. 
D)  3.

Question 18

Suppose the price of a bus ticket rises from $2.75 to $3.75 and the number of tickets sold falls from 10 000 to 8500, the price elasticity of demand, in absolute term, is:

Accepted Answer

A)  0.527. 
B) 1. 
C)  -0.527. 
D)  -1. 
A)  0.527. 
B) 1. 
C)  -0.527. 
D)  -1.

Question 19

If the elasticity of demand is infinite, then we can say that demand is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 20

The tax incidence indicates that tax is always paid by sellers.

Accepted Answer

A) True 
 B)False

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

The number of computers bought increased by 20 per cent when the price of online services declined by 10 per cent. Assuming other factors are held constant, computers and online services are classified as:

The cross-elasticity of demand:

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation, the value of price elasticity of demand for Pepsi-Cola is:

Suppose that the quantity of apples sold increases by 30 per cent after the price of pears increases by 15 per cent. What is the coefficient of the cross elasticity of demand?

The elasticity of demand for food would most likely be:

The income elasticity coefficient is:

Price elasticity of demand measures:

Price elasticity of supply measures the responsiveness of the quality of a supplied good to a change in price.

The price elasticity of demand formula includes:

The major determinants of price elasticity of demand are:

If the demand is elastic, the total revenue test of price elasticity will show a/an:

The income elasticity of demand is the ratio of the percentage change in:

The price-elastic portion of the linear demand curve lies:

The price elasticity coefficient of demand is:

-Refer to Exhibit 5.2. Assume that a wealthy buyer, Mr Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5.2, which graph illustrates the shape of the demand curve for silver?

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:

Suppose the price of a bus ticket rises from $2.75 to $3.75 and the number of tickets sold falls from 10 000 to 8500, the price elasticity of demand, in absolute term, is:

If the elasticity of demand is infinite, then we can say that demand is perfectly inelastic.

The tax incidence indicates that tax is always paid by sellers.

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

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

The number of computers bought increased by 20 per cent when the price of online services declined by 10 per cent. Assuming other factors are held constant, computers and online services are classified as:

The cross-elasticity of demand:

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation, the value of price elasticity of demand for Pepsi-Cola is:

Suppose that the quantity of apples sold increases by 30 per cent after the price of pears increases by 15 per cent. What is the coefficient of the cross elasticity of demand?

The elasticity of demand for food would most likely be:

The income elasticity coefficient is:

Price elasticity of demand measures:

Price elasticity of supply measures the responsiveness of the quality of a supplied good to a change in price.

The price elasticity of demand formula includes:

The major determinants of price elasticity of demand are:

If the demand is elastic, the total revenue test of price elasticity will show a/an:

The income elasticity of demand is the ratio of the percentage change in:

The price-elastic portion of the linear demand curve lies:

The price elasticity coefficient of demand is:

-Refer to Exhibit 5.2. Assume that a wealthy buyer, Mr Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5.2, which graph illustrates the shape of the demand curve for silver?

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:

Suppose the price of a bus ticket rises from $2.75 to $3.75 and the number of tickets sold falls from 10 000 to 8500, the price elasticity of demand, in absolute term, is:

If the elasticity of demand is infinite, then we can say that demand is perfectly inelastic.

The tax incidence indicates that tax is always paid by sellers.

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