Question 1

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

Accepted Answer

A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1. 
A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1. C

Question 2

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

Accepted Answer

A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall. 
C)  Total expenditures will rise. 
D)  The information is insufficient to answer the question. 
A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall. 
C)  Total expenditures will rise. 
D)  The information is insufficient to answer the question. C

Question 3

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

Accepted Answer

A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1. 
A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1. A

Question 4

Consider the market for strawberries. Which of the following statements most likely applies to the strawberry market?

Accepted Answer

A)  The income elasticity of demand for strawberries is negative. 
B)  The price elasticity of supply of strawberries is greater in the short run than in the long run. 
C)  The price elasticity of demand for strawberries is lower in the long run than in the short run. 
D)  The cross-price elasticity of demand for strawberries with respect to the price of raspberries is positive. 
A)  The income elasticity of demand for strawberries is negative. 
B)  The price elasticity of supply of strawberries is greater in the short run than in the long run. 
C)  The price elasticity of demand for strawberries is lower in the long run than in the short run. 
D)  The cross-price elasticity of demand for strawberries with respect to the price of raspberries is positive.

Question 5

Use the following to answer questions 
Figure: The Linear Demand Curve  
-(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _____, and you notice that your price elasticity of demand is _____.

Accepted Answer

A)  increase; elastic 
B)  decrease; elastic 
C)  increase; inelastic 
D)  decrease; inelastic 
A)  increase; elastic 
B)  decrease; elastic 
C)  increase; inelastic 
D)  decrease; inelastic

Question 6

Suppose the cross-price elasticity of demand for pork with respect to the price of chicken is equal to +0.4. What does this tell you about the relation between pork and chicken? What will happen to consumption of pork if the price of chicken falls by 20%?

Accepted Answer

The answer of Suppose the cross-price elasticity of demand for...

Question 7

The price elasticity of demand is the ratio of the percent change in quantity demanded to the percent change in price as one moves along the demand curve.

Accepted Answer

A) True 
 B)False

Question 8

Decreases in input costs and a longer time since a price change will tend to:

Accepted Answer

A)  increase the price elasticity of supply. 
B)  decrease price elasticity of supply. 
C)  have no impact on the price elasticity of supply. 
D)  increase price elasticity of supply with decreases in input costs but decrease price elasticity of supply with length of time.
Answer Key 
A)  increase the price elasticity of supply. 
B)  decrease price elasticity of supply. 
C)  have no impact on the price elasticity of supply. 
D)  increase price elasticity of supply with decreases in input costs but decrease price elasticity of supply with length of time.
Answer Key

Question 9

The price elasticity of demand measures the:

Accepted Answer

A)  responsiveness of quantity demanded to a change in price. 
B)  responsiveness of price to a change in quantity demanded. 
C)  extent to which prices are flexible and respond to market forces. 
D)  responsiveness of demand when price is held constant and demand increases or decreases. 
A)  responsiveness of quantity demanded to a change in price. 
B)  responsiveness of price to a change in quantity demanded. 
C)  extent to which prices are flexible and respond to market forces. 
D)  responsiveness of demand when price is held constant and demand increases or decreases.

Question 10

A major determinant of the price elasticity of demand is the availability of substitutes.

Accepted Answer

A) True 
 B)False

Question 11

If the price elasticity of demand between two points on a demand curve is 0.75, then the demand between those two points is:

Accepted Answer

A)  price unit-elastic. 
B)  price-inelastic. 
C)  price-elastic. 
D)  unknown. 
A)  price unit-elastic. 
B)  price-inelastic. 
C)  price-elastic. 
D)  unknown.

Question 12

The mayor advocates raising the entrance fee at the city's pools to increase revenue for the city. The mayor is right only if the price effect dominates the quantity effect.

Accepted Answer

A) True 
 B)False

Question 13

The price elasticity of demand measures the:

Accepted Answer

A)  responsiveness of the change in quantity demanded to a change in price. 
B)  change in price versus a change in quantity demanded. 
C)  responsiveness of the change in the slope of the demand curve to a change in price. 
D)  change in the slope of the demand curve versus a change in the quantity demanded. 
A)  responsiveness of the change in quantity demanded to a change in price. 
B)  change in price versus a change in quantity demanded. 
C)  responsiveness of the change in the slope of the demand curve to a change in price. 
D)  change in the slope of the demand curve versus a change in the quantity demanded.

Question 14

Sarah has been told she has only one week to finish some pottery for a show. Sarah has exhausted her supply of clay, and new clay is absolutely necessary for finishing her products. For Sarah, the price elasticity of demand for new clay is elastic.

Accepted Answer

A) True 
 B)False

Question 15

Suppose the price of Vanilla Coke increases by 9% and quantity demanded falls by 13% overall but only by 4% for loyal Coca-Cola customers. This means that for the general public there are _____ for Vanilla Coke, but for loyal Coca-Cola customers, Vanilla Coke is more of a _____ item. This means that Coca-Cola will enjoy an increase in total revenue only from _____.

Accepted Answer

A)  several substitutes; necessity; loyal Coca-Cola customers 
B)  few substitutes; luxury; the general public 
C)  no substitutes; necessity; the general public 
D)  several substitutes; necessity; the general public 
A)  several substitutes; necessity; loyal Coca-Cola customers 
B)  few substitutes; luxury; the general public 
C)  no substitutes; necessity; the general public 
D)  several substitutes; necessity; the general public

Question 16

Use the following to answer questions 
Figure: The Demand for e-Books  
-(Figure: The Demand for e-Books) If the price of e-Books increases from $6 to $8, total revenue _____, which means that demand is _____.

Accepted Answer

A)  increases; elastic 
B)  decreases; inelastic 
C)  remains constant; elastic 
D)  decreases; elastic 
A)  increases; elastic 
B)  decreases; inelastic 
C)  remains constant; elastic 
D)  decreases; elastic

Question 17

If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at the current price, funeral homes should increase prices to increase revenue.

Accepted Answer

A) True 
 B)False

Question 18

All of the following are characteristics of a good with elastic demand EXCEPT:

Accepted Answer

A)  a short time to adjust to price changes. 
B)  a large number of substitutes. 
C)  luxury. 
D)  specific brands. 
A)  a short time to adjust to price changes. 
B)  a large number of substitutes. 
C)  luxury. 
D)  specific brands.

Question 19

Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys one-fourth of the nation's blueberry crop, how will that affect total revenue, all other things unchanged?

Accepted Answer

A)  Total revenue will rise. 
B)  Total revenue will fall. 
C)  Total revenue will remain unchanged. 
D)  The information is insufficient to answer the question. 
A)  Total revenue will rise. 
B)  Total revenue will fall. 
C)  Total revenue will remain unchanged. 
D)  The information is insufficient to answer the question.

Question 20

If demand is perfectly inelastic, changes in price leave total revenue unchanged.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

Consider the market for strawberries. Which of the following statements most likely applies to the strawberry market?

Use the following to answer questions Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _____, and you notice that your price elasticity of demand is _____.

Suppose the cross-price elasticity of demand for pork with respect to the price of chicken is equal to +0.4. What does this tell you about the relation between pork and chicken? What will happen to consumption of pork if the price of chicken falls by 20%?

The price elasticity of demand is the ratio of the percent change in quantity demanded to the percent change in price as one moves along the demand curve.

Decreases in input costs and a longer time since a price change will tend to:

The price elasticity of demand measures the:

A major determinant of the price elasticity of demand is the availability of substitutes.

If the price elasticity of demand between two points on a demand curve is 0.75, then the demand between those two points is:

The mayor advocates raising the entrance fee at the city's pools to increase revenue for the city. The mayor is right only if the price effect dominates the quantity effect.

The price elasticity of demand measures the:

Sarah has been told she has only one week to finish some pottery for a show. Sarah has exhausted her supply of clay, and new clay is absolutely necessary for finishing her products. For Sarah, the price elasticity of demand for new clay is elastic.

Use the following to answer questions Figure: The Demand for e-Books -(Figure: The Demand for e-Books) If the price of e-Books increases from $6 to $8, total revenue _____, which means that demand is _____.

If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at the current price, funeral homes should increase prices to increase revenue.

All of the following are characteristics of a good with elastic demand EXCEPT:

Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys one-fourth of the nation's blueberry crop, how will that affect total revenue, all other things unchanged?

If demand is perfectly inelastic, changes in price leave total revenue unchanged.

First Principles

Economic Models- Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas- Meddling With Markets

Taxes

The Rational Consumer

International Trade

Decision Making by Individuals and Firms

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Macroeconomics- the Big Picture

Gdp and the Consumer Price Index

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Macroeconomics- Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

Toward a Fuller Understanding

Consumer Preferences and Consumer Choice

Indifference Curve Analysis of Labor Supply

Filters

Use the following to answer questions Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _, and you notice that your price elasticity of demand is _.

Use the following to answer questions Figure: The Demand for e-Books -(Figure: The Demand for e-Books) If the price of e-Books increases from $6 to $8, total revenue _, which means that demand is _.