Question 1

The ratio of the percentage change in quantity demanded to the percentage change in price is the _____ elasticity of demand.

Accepted Answer

A)  price 
B)  quantity 
C)  income 
D)  cross-price 
A)  price 
B)  quantity 
C)  income 
D)  cross-price

Question 2

Use the following to answer questions 
Figure: The Demand Curve  
-(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $8 is approximately:

Accepted Answer

A)  0.23. 
B)  0.45. 
C)  2.33. 
D)  4.50. 
A)  0.23. 
B)  0.45. 
C)  2.33. 
D)  4.50.

Question 3

The price elasticity of demand is measured by _____ the percentage change in _____ the percentage change in _____.

Accepted Answer

A)  dividing; price by; quantity demanded 
B)  dividing; quantity demanded by; price 
C)  subtracting; price from; quantity demanded 
D)  adding; price to; quantity demanded 
A)  dividing; price by; quantity demanded 
B)  dividing; quantity demanded by; price 
C)  subtracting; price from; quantity demanded 
D)  adding; price to; quantity demanded

Question 4

Goods A and B have a positive cross-price elasticity of demand. This means goods A and B are:

Accepted Answer

A)  normal. 
B)  substitutes. 
C)  complements. 
D)  inferior. 
A)  normal. 
B)  substitutes. 
C)  complements. 
D)  inferior.

Question 5

Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by:

Accepted Answer

A)  0.1%. 
B)  1%. 
C)  5%. 
D)  50%. 
A)  0.1%. 
B)  1%. 
C)  5%. 
D)  50%.

Question 6

If the estimated price elasticity of demand for foreign travel is 4:

Accepted Answer

A)  a 20% decrease in the price of foreign travel will increase quantity demanded by 80%. 
B)  the demand for foreign travel is inelastic. 
C)  a 10% increase in the price of foreign travel will increase quantity demanded by 40%. 
D)  a 20% increase in the price of foreign travel will increase quantity demanded by 80%. 
A)  a 20% decrease in the price of foreign travel will increase quantity demanded by 80%. 
B)  the demand for foreign travel is inelastic. 
C)  a 10% increase in the price of foreign travel will increase quantity demanded by 40%. 
D)  a 20% increase in the price of foreign travel will increase quantity demanded by 80%.

Question 7

Use the following to answer questions 
Figure: The Market for Lattes  
-(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint formula?

Accepted Answer

A)  1.00 
B)  1.29 
C)  1.51 
D)  3.00 
A)  1.00 
B)  1.29 
C)  1.51 
D)  3.00

Question 8

Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of free range eggs when the price is $7. What is the value of Tomas's price elasticity of supply?

Accepted Answer

A)  1.2 
B)  2.0 
C)  1.0 
D)  3.2 
A)  1.2 
B)  2.0 
C)  1.0 
D)  3.2

Question 9

Suppose you are told that the short-run price elasticity of supply for a movie theater is zero. Does this make sense?

Accepted Answer

Yes. The number of seats in a movie thea

Question 10

All else equal, when the demand for oil increases, the price will increase. Some economists say that this is only a short-run worry because in the long run a more elastic supply curve will benefit consumers. Do you agree? Explain.

Accepted Answer

It is probably true that the long-run su

Question 11

The price elasticity of demand for cabbage has been estimated to be 0.25. If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect total expenditures on cabbage, all other things equal?

Accepted Answer

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

Question 12

Jessica's income increased by 10% this year. In the same year, Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%. This means that for Jessica:

Accepted Answer

A)  both milk and bread are inferior goods. 
B)  both milk and bread are normal goods. 
C)  milk is an inferior good, but bread is a normal good. 
D)  milk is a normal good, but bread is an inferior good. 
A)  both milk and bread are inferior goods. 
B)  both milk and bread are normal goods. 
C)  milk is an inferior good, but bread is a normal good. 
D)  milk is a normal good, but bread is an inferior good.

Question 13

The income elasticity of demand for an inferior good, such as a macaroni and cheese dinner, is negative.

Accepted Answer

A) True 
 B)False

Question 14

The price elasticity of demand for gasoline in the long run has been estimated to be 1.5. If an extended war in the Middle East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things equal?

Accepted Answer

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

Question 15

Use the following to answer questions 
Figure: The Demand Curve  
-(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _____. If the price is $7, total revenue is _____.

Accepted Answer

A)  $24; $16 
B)  $14; $21 
C)  $16; $21 
D)  $10; $10 
A)  $24; $16 
B)  $14; $21 
C)  $16; $21 
D)  $10; $10

Question 16

Suppose the income elasticity for cross-country bus trips is -2 and the income elasticity for cross-country plane trips is +2. Does this make sense? Explain your answer.

Accepted Answer

Yes, it makes sense. With a negative inc

Question 17

Suppose the price elasticity of demand for electricity is equal to 0.15 in the short run but is equal to 0.5 in the long run. What explains this difference, and what does this imply about the demand curve for electricity in the short run versus the long run?

Accepted Answer

The demand for electricity in the long r

Question 18

Use the following to answer questions 
Figure: The Demand Curve  
-(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $5, total revenue is:

Accepted Answer

A)  $5. 
B)  $10. 
C)  $20. 
D)  $25. 
A)  $5. 
B)  $10. 
C)  $20. 
D)  $25.

Question 19

Suppose the price of e-books is initially $20 but decreases to $15. The absolute value of the percentage change in price (by the midpoint method) is approximately:

Accepted Answer

A)  28%. 
B)  10%. 
C)  5%. 
D)  15%. 
A)  28%. 
B)  10%. 
C)  5%. 
D)  15%.

Question 20

If the price elasticity of demand for tobacco is 0.5 and the income elasticity of demand for tobacco is 0.4:

Accepted Answer

A)  an increase in the price of tobacco will decrease total revenue from sales of tobacco. 
B)  a 20% increase in the price of tobacco will decrease the quantity demanded of tobacco by 8%. 
C)  tobacco is an inferior good. 
D)  a 50% increase in income will increase the quantity demanded of tobacco by 20%. 
A)  an increase in the price of tobacco will decrease total revenue from sales of tobacco. 
B)  a 20% increase in the price of tobacco will decrease the quantity demanded of tobacco by 8%. 
C)  tobacco is an inferior good. 
D)  a 50% increase in income will increase the quantity demanded of tobacco by 20%.

Exam 6: Elasticity

The ratio of the percentage change in quantity demanded to the percentage change in price is the _____ elasticity of demand.

Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $8 is approximately:

The price elasticity of demand is measured by _____ the percentage change in _____ the percentage change in _____.

Goods A and B have a positive cross-price elasticity of demand. This means goods A and B are:

Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by:

If the estimated price elasticity of demand for foreign travel is 4:

Use the following to answer questions Figure: The Market for Lattes -(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint formula?

Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of free range eggs when the price is $7. What is the value of Tomas's price elasticity of supply?

Suppose you are told that the short-run price elasticity of supply for a movie theater is zero. Does this make sense?

All else equal, when the demand for oil increases, the price will increase. Some economists say that this is only a short-run worry because in the long run a more elastic supply curve will benefit consumers. Do you agree? Explain.

The price elasticity of demand for cabbage has been estimated to be 0.25. If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect total expenditures on cabbage, all other things equal?

Jessica's income increased by 10% this year. In the same year, Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%. This means that for Jessica:

The income elasticity of demand for an inferior good, such as a macaroni and cheese dinner, is negative.

Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _____. If the price is $7, total revenue is _____.

Suppose the income elasticity for cross-country bus trips is -2 and the income elasticity for cross-country plane trips is +2. Does this make sense? Explain your answer.

Suppose the price elasticity of demand for electricity is equal to 0.15 in the short run but is equal to 0.5 in the long run. What explains this difference, and what does this imply about the demand curve for electricity in the short run versus the long run?

Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $5, total revenue is:

Suppose the price of e-books is initially $20 but decreases to $15. The absolute value of the percentage change in price (by the midpoint method) is approximately:

If the price elasticity of demand for tobacco is 0.5 and the income elasticity of demand for tobacco is 0.4:

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

The price elasticity of demand is measured by ___ the percentage change in _ the percentage change in ___.

Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _. If the price is $7, total revenue is _.