Question 1

Unit elastic demand occurs when

Accepted Answer

A)  a one-unit increase in price leads to a one-unit decrease in quantity demanded 
B)  a 1% increase in price leads to a one-unit decrease in quantity demanded 
C)  price elasticity of demand is positive 
D)  price elasticity of demand is exactly zero 
E)  price elasticity of demand is exactly -1 
A)  a one-unit increase in price leads to a one-unit decrease in quantity demanded 
B)  a 1% increase in price leads to a one-unit decrease in quantity demanded 
C)  price elasticity of demand is positive 
D)  price elasticity of demand is exactly zero 
E)  price elasticity of demand is exactly -1

Question 2

Exhibit 5-21
  
-Use the information in Exhibit 5-21 to calculate the value of income elasticity of demand for Good A.

Accepted Answer

A)  1 
B)  2/9 
C)  3/11 
D)  11/3 
E)  9/2 
A)  1 
B)  2/9 
C)  3/11 
D)  11/3 
E)  9/2

Question 3

Exhibit 5-3
  
-Use the information in Exhibit 5-3 to calculate the value of price elasticity of demand for restaurant meals.

Accepted Answer

A)  -1/2 
B)  -5/3 
C)  -3/5 
D)  -3/7 
E)  -7/3 
A)  -1/2 
B)  -5/3 
C)  -3/5 
D)  -3/7 
E)  -7/3

Question 4

Price elasticity of demand is defined as

Accepted Answer

A)  the percentage change in price divided by the percentage change in quantity demanded 
B)  the percentage change in quantity demanded divided by the percentage change in price 
C)  the change in quantity demanded divided by the change in price 
D)  the change in price divided by the change in quantity demanded 
E)  the quantity demanded divided by the price 
A)  the percentage change in price divided by the percentage change in quantity demanded 
B)  the percentage change in quantity demanded divided by the percentage change in price 
C)  the change in quantity demanded divided by the change in price 
D)  the change in price divided by the change in quantity demanded 
E)  the quantity demanded divided by the price

Question 5

Negative cross-price elasticity of demand indicates that

Accepted Answer

A)  the product is an inferior good 
B)  the product is a necessity 
C)  the product is a luxury 
D)  the two products are substitutes 
E)  the two products are complements 
A)  the product is an inferior good 
B)  the product is a necessity 
C)  the product is a luxury 
D)  the two products are substitutes 
E)  the two products are complements

Question 6

If a 5% increase in price leads to an 8% decrease in quantity demanded,demand is

Accepted Answer

A)  perfectly elastic 
B)  elastic 
C)  unit elastic 
D)  inelastic 
E)  perfectly inelastic 
A)  perfectly elastic 
B)  elastic 
C)  unit elastic 
D)  inelastic 
E)  perfectly inelastic

Question 7

If a price reduction leads to larger total revenue,demand is

Accepted Answer

A)  perfectly inelastic 
B)  inelastic 
C)  unit elastic 
D)  elastic 
E)  perfectly elastic 
A)  perfectly inelastic 
B)  inelastic 
C)  unit elastic 
D)  elastic 
E)  perfectly elastic

Question 8

If income rises and the demand for a product remains unchanged,the income elasticity of demand for that product is unit elastic.

Accepted Answer

A) True 
 B)False

Question 9

A 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a service.This service is a(n) _____ good and demand is _____.

Accepted Answer

A)  normal;elastic 
B)  normal;inelastic 
C)  normal;unit elastic 
D)  inferior;elastic 
E)  inferior;inelastic 
A)  normal;elastic 
B)  normal;inelastic 
C)  normal;unit elastic 
D)  inferior;elastic 
E)  inferior;inelastic

Question 10

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10. 
A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 11

Exhibit 5-15
  
-Which demand curve in Exhibit 5-15 is perfectly elastic?

Accepted Answer

A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e 
A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e

Question 12

Total revenue is maximized where demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

If people have more time to adjust to a price change,

Accepted Answer

A)  demand becomes more elastic,and supply becomes less elastic 
B)  demand becomes less elastic,and supply becomes more elastic 
C)  both supply and demand become less elastic 
D)  both supply and demand become more elastic 
E)  elasticity of both demand and supply tends toward unity 
A)  demand becomes more elastic,and supply becomes less elastic 
B)  demand becomes less elastic,and supply becomes more elastic 
C)  both supply and demand become less elastic 
D)  both supply and demand become more elastic 
E)  elasticity of both demand and supply tends toward unity

Question 14

The supply curve will be more elastic if

Accepted Answer

A)  the good has few substitutes 
B)  the time the producer has to adjust is long 
C)  the time frame for adjusting to price changes is short 
D)  demand is elastic 
E)  demand is inelastic 
A)  the good has few substitutes 
B)  the time the producer has to adjust is long 
C)  the time frame for adjusting to price changes is short 
D)  demand is elastic 
E)  demand is inelastic

Question 15

Exhibit 5-9
  
-Between points a and b on the demand curve in Exhibit 5-9,demand is

Accepted Answer

A)  perfectly elastic 
B)  elastic 
C)  perfectly inelastic 
D)  inelastic 
E)  unit elastic 
A)  perfectly elastic 
B)  elastic 
C)  perfectly inelastic 
D)  inelastic 
E)  unit elastic

Question 16

If the managers of a theater plan to raise ticket prices to increase ticket revenues,then they must believe that demand is

Accepted Answer

A)  elastic 
B)  inelastic 
C)  unit elastic 
D)  perfectly elastic 
E)  income elastic 
A)  elastic 
B)  inelastic 
C)  unit elastic 
D)  perfectly elastic 
E)  income elastic

Question 17

The price elasticity of demand is equal to the slope of the demand curve.

Accepted Answer

A) True 
 B)False

Question 18

A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if

Accepted Answer

A)  demand is elastic 
B)  supply is inelastic 
C)  demand falls 
D)  demand is inelastic 
E)  supply is unit elastic 
A)  demand is elastic 
B)  supply is inelastic 
C)  demand falls 
D)  demand is inelastic 
E)  supply is unit elastic

Question 19

Demand is inelastic if

Accepted Answer

A)  the percentage change in price is greater than the percentage change in quantity demanded 
B)  the percentage change in price is less than the percentage change in quantity demanded 
C)  the percentage change in price is equal to the percentage change in quantity demanded 
D)  the value of price elasticity is equal to -1 
E)  the value of price elasticity is less than -1 
A)  the percentage change in price is greater than the percentage change in quantity demanded 
B)  the percentage change in price is less than the percentage change in quantity demanded 
C)  the percentage change in price is equal to the percentage change in quantity demanded 
D)  the value of price elasticity is equal to -1 
E)  the value of price elasticity is less than -1

Question 20

If the cross-price elasticity of demand is -3,then

Accepted Answer

A)  the goods are substitutes 
B)  one good is price inelastic 
C)  one good is an inferior good 
D)  one good is a luxury good 
E)  the goods are complements 
A)  the goods are substitutes 
B)  one good is price inelastic 
C)  one good is an inferior good 
D)  one good is a luxury good 
E)  the goods are complements

Exam 5: Elasticity of Demand and Supply

Unit elastic demand occurs when

Exhibit 5-21 -Use the information in Exhibit 5-21 to calculate the value of income elasticity of demand for Good A.

Exhibit 5-3 -Use the information in Exhibit 5-3 to calculate the value of price elasticity of demand for restaurant meals.

Price elasticity of demand is defined as

Negative cross-price elasticity of demand indicates that

If a 5% increase in price leads to an 8% decrease in quantity demanded,demand is

If a price reduction leads to larger total revenue,demand is

If income rises and the demand for a product remains unchanged,the income elasticity of demand for that product is unit elastic.

A 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a service.This service is a(n) _____ good and demand is _____.

Which of the following describes a situation in which demand must be inelastic?

Exhibit 5-15 -Which demand curve in Exhibit 5-15 is perfectly elastic?

Total revenue is maximized where demand is inelastic.

If people have more time to adjust to a price change,

The supply curve will be more elastic if

Exhibit 5-9 -Between points a and b on the demand curve in Exhibit 5-9,demand is

If the managers of a theater plan to raise ticket prices to increase ticket revenues,then they must believe that demand is

The price elasticity of demand is equal to the slope of the demand curve.

A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if

Demand is inelastic if

If the cross-price elasticity of demand is -3,then

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A 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a service.This service is a(n) _ good and demand is _.