Question 1

For which of the following would the absolute price elasticity of demand be greatest?

Accepted Answer

A) Salt 
B) Tickets to the Super Bowl 
C) Pepsi Cola 
D) Gasoline 
A) Salt 
B) Tickets to the Super Bowl 
C) Pepsi Cola 
D) Gasoline

Question 2

The most important determinant of the elasticity of supply is

Accepted Answer

A) whether the good is a durable good or a nondurable good. 
B) the price of the good. 
C) the time period firms have to adjust to the new price. 
D) the proportion of the good in the budget of consumers. 
A) whether the good is a durable good or a nondurable good. 
B) the price of the good. 
C) the time period firms have to adjust to the new price. 
D) the proportion of the good in the budget of consumers.

Question 3

If the absolute price elasticity of demand is 2.0,a 5 percent decrease in price will increase quantity demanded by

Accepted Answer

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

Question 4

For an addictive drug such as heroin,if the price of heroin increases,then

Accepted Answer

A) the quantity demanded never changes. 
B) the quantity demanded will decrease by a relatively large amount. 
C) the quantity demanded will actually increase. 
D) the quantity demanded will decrease by a relatively small amount. 
A) the quantity demanded never changes. 
B) the quantity demanded will decrease by a relatively large amount. 
C) the quantity demanded will actually increase. 
D) the quantity demanded will decrease by a relatively small amount.

Question 5

Which of the following would most likely exhibit the highest price elasticity of demand?

Accepted Answer

A) Gasoline 
B) One particular brand of toothpaste 
C) Motor oil 
D) Salt 
A) Gasoline 
B) One particular brand of toothpaste 
C) Motor oil 
D) Salt

Question 6

$$\begin{array} { l r r r r r r } 
\text { Month } & \mathbf { P X } _ { \mathbf { X } } & \mathbf { Q X } & \mathbf { P } _ { \mathbf { Y } } & \mathbf { Q } & \mathbf { P } _ { \mathbf { Z } } & \mathbf { \text { QZ } } \
\hline \text { Jan } & \$ 10 & 100 & \$ 20 & 50 & \$ 25 & 200 \
\text { Feb } & 10 & 90 & 18 & 60 & 25 & 225 \
\text { Mar } & 10 & 70 & 15 & 90 & 25 & 275 \
\text { Apr } & 12 & 50 & 15 & 100 & 25 & 290 \
\text { May } & 15 & 25 & 15 & 120 & 25 & 320\\hline
\end{array}$$
-In the above table,the cross price elasticity of demand for good X with good Y when PY falls from $20 to $18 is

Accepted Answer

A) -2. 
B) 0. 
C) +1. 
D) -1. 
A) -2. 
B) 0. 
C) +1. 
D) -1.

Question 7

When the consumer spends a small portion of his income on a good,demand will be

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) elastic,unit-elastic or inelastic depending upon supply. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) elastic,unit-elastic or inelastic depending upon supply.

Question 8

Which of the following is a determinant of the price elasticity of demand for an item?

Accepted Answer

A) The availability of a close substitute for the item 
B) The percentage of a consumers budget allocated to expenditures on the item 
C) The amount of time available to adjust to a change in the price of the item 
D) All of the above are correct 
A) The availability of a close substitute for the item 
B) The percentage of a consumers budget allocated to expenditures on the item 
C) The amount of time available to adjust to a change in the price of the item 
D) All of the above are correct

Question 9

Relative percentage changes are used in measuring price elasticity of demand,so that

Accepted Answer

A) it does not matter whether price increases or decreases when calculating the elasticity. 
B) it does not matter what units are used to measure prices or quantities. 
C) we always obtain a positive number. 
D) larger numbers indicate greater responsiveness. 
A) it does not matter whether price increases or decreases when calculating the elasticity. 
B) it does not matter what units are used to measure prices or quantities. 
C) we always obtain a positive number. 
D) larger numbers indicate greater responsiveness.

Question 10

When the absolute price elasticity of demand equals 1,demand is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) undetermined without more information. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) undetermined without more information.

Question 11

Two items which have a positive cross price elasticity of demand are referred to as

Accepted Answer

A) luxury goods. 
B) inferior goods. 
C) substitutes. 
D) complements. 
A) luxury goods. 
B) inferior goods. 
C) substitutes. 
D) complements.

Question 12

When quantity supplied is very responsive to a change in price,supply is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) income sensitive. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) income sensitive.

Question 13

Generally,expenses on toothpaste are a small part of a consumer's budget,so the demand for toothpaste is more likely to be

Accepted Answer

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

Question 14

The more sensitive people are to a change in price,the

Accepted Answer

A) greater a change in price must be to induce a certain change in quantity demanded. 
B) greater is the price elasticity of demand. 
C) smaller the price elasticity of demand. 
D) closer the price elasticity of demand is to one. 
A) greater a change in price must be to induce a certain change in quantity demanded. 
B) greater is the price elasticity of demand. 
C) smaller the price elasticity of demand. 
D) closer the price elasticity of demand is to one.

Question 15

If demand is inelastic and the price of a product decreases by 10 percent,then

Accepted Answer

A) the change in quantity demanded is less than 10 percent. 
B) the change in quantity demanded is equal to 10 percent. 
C) the change in quantity demanded is greater than 10 percent. 
D) the decrease in quantity demanded is greater than 0 percent. 
A) the change in quantity demanded is less than 10 percent. 
B) the change in quantity demanded is equal to 10 percent. 
C) the change in quantity demanded is greater than 10 percent. 
D) the decrease in quantity demanded is greater than 0 percent.

Question 16

If the quantity demanded of a product is the same for each possible price,demand is

Accepted Answer

A) unit-elastic. 
B) elastic. 
C) perfectly elastic. 
D) perfectly inelastic. 
A) unit-elastic. 
B) elastic. 
C) perfectly elastic. 
D) perfectly inelastic.

Question 17

If the demand curve for a product is horizontal,then

Accepted Answer

A) the demand for the product is perfectly inelastic. 
B) the demand for the product is perfectly elastic. 
C) only a certain amount of the product will be consumed regardless of price. 
D) the price elasticity of the product approaches zero. 
A) the demand for the product is perfectly inelastic. 
B) the demand for the product is perfectly elastic. 
C) only a certain amount of the product will be consumed regardless of price. 
D) the price elasticity of the product approaches zero.

Question 18

If the calculated price elasticity of demand between two points is -4,demand is

Accepted Answer

A) inelastic. 
B) elastic. 
C) unresponsive to price. 
D) unit-elastic. 
A) inelastic. 
B) elastic. 
C) unresponsive to price. 
D) unit-elastic.

Question 19

If your income rises by 15 percent and,as a result,you buy more steak,then steak is a(n)

Accepted Answer

A) substitute. 
B) normal good. 
C) complement. 
D) inferior good. 
A) substitute. 
B) normal good. 
C) complement. 
D) inferior good.

Question 20

The price elasticity of demand is measured by the

Accepted Answer

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

Exam 6: Demand and Supply Elasticity

For which of the following would the absolute price elasticity of demand be greatest?

The most important determinant of the elasticity of supply is

If the absolute price elasticity of demand is 2.0,a 5 percent decrease in price will increase quantity demanded by

For an addictive drug such as heroin,if the price of heroin increases,then

Which of the following would most likely exhibit the highest price elasticity of demand?

Month Jan \ 10 100 \ 20 50 \ 25 200 Feb 10 90 18 60 25 225 Mar 10 70 15 90 25 275 Apr 12 50 15 100 25 290 May 15 25 15 120 25 320 -In the above table,the cross price elasticity of demand for good X with good Y when PY falls from $20 to $18 is

When the consumer spends a small portion of his income on a good,demand will be

Which of the following is a determinant of the price elasticity of demand for an item?

Relative percentage changes are used in measuring price elasticity of demand,so that

When the absolute price elasticity of demand equals 1,demand is

Two items which have a positive cross price elasticity of demand are referred to as

When quantity supplied is very responsive to a change in price,supply is

Generally,expenses on toothpaste are a small part of a consumer's budget,so the demand for toothpaste is more likely to be

The more sensitive people are to a change in price,the

If demand is inelastic and the price of a product decreases by 10 percent,then

If the quantity demanded of a product is the same for each possible price,demand is

If the demand curve for a product is horizontal,then

If the calculated price elasticity of demand between two points is -4,demand is

If your income rises by 15 percent and,as a result,you buy more steak,then steak is a(n)

The price elasticity of demand is measured by the

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Consumer Choice

Rents, profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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