Question 1

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price.The price elasticity of demand for this good is

Accepted Answer

A) inelastic and equal to 0.67. 
B) elastic and equal to 0.67. 
C) inelastic and equal to 1.50. 
D) elastic and equal to 1.50. 
A) inelastic and equal to 0.67. 
B) elastic and equal to 0.67. 
C) inelastic and equal to 1.50. 
D) elastic and equal to 1.50. A

Question 2

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750.The price elasticity of demand for Skip's Sealcoating Service is

Accepted Answer

A) 0.11. 
B) 0.47. 
C) 1.12. 
D) 2.11. 
A) 0.11. 
B) 0.47. 
C) 1.12. 
D) 2.11. B

Question 3

Figure 5-4  
-Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Accepted Answer

A) the percent decrease in the quantity demanded exceeds the percent increase in the price. 
B) the percent increase in the price exceeds the percent decrease in the quantity demanded. 
C) sellers' total revenue increases as a result. 
D) it is possible that the quantity demanded fell from 550 to 500 as a result. 
A) the percent decrease in the quantity demanded exceeds the percent increase in the price. 
B) the percent increase in the price exceeds the percent decrease in the quantity demanded. 
C) sellers' total revenue increases as a result. 
D) it is possible that the quantity demanded fell from 550 to 500 as a result. A

Question 4

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and,as a result,the quantity of bags demanded increases from 600 to 800.Using the midpoint method,the price elasticity of demand for frozen chicken nuggets in the given price range is

Accepted Answer

A) 0.35. 
B) 0.43. 
C) 2.33. 
D) 2.89. 
A) 0.35. 
B) 0.43. 
C) 2.33. 
D) 2.89.

Question 5

Other things equal,the demand for a good tends to be more inelastic,the

Accepted Answer

A) fewer the available substitutes. 
B) longer the time period considered. 
C) more the good is considered a luxury good. 
D) more narrowly defined is the market for the good. 
A) fewer the available substitutes. 
B) longer the time period considered. 
C) more the good is considered a luxury good. 
D) more narrowly defined is the market for the good.

Question 6

Figure 5-3  
-Refer to Figure 5-3.The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

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

Question 7

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year,the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80.Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie,the quantity demanded of Sue's Subs increases from 80 to 100.Suppose also that when the average student's income increases to $12,000 per year,the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1.Using the midpoint method,the cross price elasticity of demand is

Accepted Answer

A) about 0.22,and the two goods are substitutes. 
B) about -0.005,and the two goods are complements. 
C) 1,and the two goods are substitutes. 
D) 1,and the two goods are unitary elastic. 
A) about 0.22,and the two goods are substitutes. 
B) about -0.005,and the two goods are complements. 
C) 1,and the two goods are substitutes. 
D) 1,and the two goods are unitary elastic.

Question 8

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

A) income elasticity of demand for that good. 
B) price elasticity of demand for that good. 
C) price elasticity of supply for that good. 
D) cross-price elasticity of demand for that good. 
A) income elasticity of demand for that good. 
B) price elasticity of demand for that good. 
C) price elasticity of supply for that good. 
D) cross-price elasticity of demand for that good.

Question 9

If the price elasticity of demand for a good is 0.5,then a 5 percent increase in price results in a

Accepted Answer

A) 0.1 percent decrease in the quantity demanded. 
B) 1 percent decrease in the quantity demanded. 
C) 2.5 percent decrease in the quantity demanded. 
D) 10 percent decrease in the quantity demanded. 
A) 0.1 percent decrease in the quantity demanded. 
B) 1 percent decrease in the quantity demanded. 
C) 2.5 percent decrease in the quantity demanded. 
D) 10 percent decrease in the quantity demanded.

Question 10

Demand is said to be inelastic if

Accepted Answer

A) buyers respond substantially to changes in the price of the good. 
B) demand shifts only slightly when the price of the good changes. 
C) the quantity demanded changes only slightly when the price of the good changes. 
D) the price of the good responds only slightly to changes in demand. 
A) buyers respond substantially to changes in the price of the good. 
B) demand shifts only slightly when the price of the good changes. 
C) the quantity demanded changes only slightly when the price of the good changes. 
D) the price of the good responds only slightly to changes in demand.

Question 11

While in college,Marty and Laura each buy 15 bus tickets per month.After they graduate and have full-time jobs,Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month.Comparing income elasticity of demand for bus tickets,Marty's

Accepted Answer

A) is negative,and Laura's is positive. 
B) is positive,and Laura's is negative. 
C) is zero,and Laura's is positive. 
D) is zero,and Laura's is negative. 
A) is negative,and Laura's is positive. 
B) is positive,and Laura's is negative. 
C) is zero,and Laura's is positive. 
D) is zero,and Laura's is negative.

Question 12

Necessities such as food and clothing tend to have

Accepted Answer

A) high price elasticities of demand and high income elasticities of demand. 
B) high price elasticities of demand and low income elasticities of demand. 
C) low price elasticities of demand and high income elasticities of demand. 
D) low price elasticities of demand and low income elasticities of demand. 
A) high price elasticities of demand and high income elasticities of demand. 
B) high price elasticities of demand and low income elasticities of demand. 
C) low price elasticities of demand and high income elasticities of demand. 
D) low price elasticities of demand and low income elasticities of demand.

Question 13

Heath's income elasticity of demand for concerts is 2.All else equal,this means that if his income increases by 10 percent,he will purchase tickets for

Accepted Answer

A) 2 percent more concerts. 
B) 5 percent more concerts. 
C) 10 percent more concerts. 
D) 20 percent more concerts. 
A) 2 percent more concerts. 
B) 5 percent more concerts. 
C) 10 percent more concerts. 
D) 20 percent more concerts.

Question 14

Figure 5-1  
-Refer to Figure 5-1.Between point A and point B,price elasticity of demand is equal to

Accepted Answer

A) 0.33. 
B) 0.67. 
C) 1.5 
D) 2.67. 
A) 0.33. 
B) 0.67. 
C) 1.5 
D) 2.67.

Question 15

If the price elasticity of demand for a good is 6,then a 3 percent decrease in price results in

Accepted Answer

A) a 20 percent increase in the quantity demanded. 
B) an 18 percent increase in the quantity demanded. 
C) a 2 percent increase in the quantity demanded. 
D) a 1.8 percent increase in the quantity demanded. 
A) a 20 percent increase in the quantity demanded. 
B) an 18 percent increase in the quantity demanded. 
C) a 2 percent increase in the quantity demanded. 
D) a 1.8 percent increase in the quantity demanded.

Question 16

When demand is inelastic,the price elasticity of demand is

Accepted Answer

A) less than 1,and price and total revenue will move in the same direction. 
B) less than 1,and price and total revenue will move in opposite directions. 
C) greater than 1,and price and total revenue will move in the same direction. 
D) greater than 1,and price and total revenue will move in opposite directions. 
A) less than 1,and price and total revenue will move in the same direction. 
B) less than 1,and price and total revenue will move in opposite directions. 
C) greater than 1,and price and total revenue will move in the same direction. 
D) greater than 1,and price and total revenue will move in opposite directions.

Question 17

When demand is perfectly inelastic,the price elasticity of demand

Accepted Answer

A) is zero,and the demand curve is vertical. 
B) is zero,and the demand curve is horizontal. 
C) approaches infinity,and the demand curve is vertical. 
D) approaches infinity,and the demand curve is horizontal. 
A) is zero,and the demand curve is vertical. 
B) is zero,and the demand curve is horizontal. 
C) approaches infinity,and the demand curve is vertical. 
D) approaches infinity,and the demand curve is horizontal.

Question 18

The smaller the price elasticity of demand,the

Accepted Answer

A) steeper the demand curve will be through a given point. 
B) flatter the demand curve will be through a given point. 
C) more strongly buyers respond to a change in price between any two prices P1 and P2. 
D) smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2. 
A) steeper the demand curve will be through a given point. 
B) flatter the demand curve will be through a given point. 
C) more strongly buyers respond to a change in price between any two prices P1 and P2. 
D) smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.

Question 19

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

Accepted Answer

A) 0 
B) 0.4 
C) 1 
D) 4 
A) 0 
B) 0.4 
C) 1 
D) 4

Question 20

If the price elasticity of demand for a good is 1.4,then a 14 percent increase in the quantity demanded must be the result of

Accepted Answer

A) a 0.1 percent decrease in the price. 
B) a 1 percent decrease in the price. 
C) a 10 percent decrease in the price. 
D) a 19.6 percent decrease in the price. 
A) a 0.1 percent decrease in the price. 
B) a 1 percent decrease in the price. 
C) a 10 percent decrease in the price. 
D) a 19.6 percent decrease in the price.

Exam 5: Elasticity and Its Applications: The Elasticity of Demand

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price.The price elasticity of demand for this good is

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750.The price elasticity of demand for Skip's Sealcoating Service is

Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and,as a result,the quantity of bags demanded increases from 600 to 800.Using the midpoint method,the price elasticity of demand for frozen chicken nuggets in the given price range is

Other things equal,the demand for a good tends to be more inelastic,the

Figure 5-3 -Refer to Figure 5-3.The demand curve representing the demand for a luxury good with several close substitutes is

To determine whether a good is considered normal or inferior,one could examine the value of the

If the price elasticity of demand for a good is 0.5,then a 5 percent increase in price results in a

Demand is said to be inelastic if

While in college,Marty and Laura each buy 15 bus tickets per month.After they graduate and have full-time jobs,Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month.Comparing income elasticity of demand for bus tickets,Marty's

Necessities such as food and clothing tend to have

Heath's income elasticity of demand for concerts is 2.All else equal,this means that if his income increases by 10 percent,he will purchase tickets for

Figure 5-1 -Refer to Figure 5-1.Between point A and point B,price elasticity of demand is equal to

If the price elasticity of demand for a good is 6,then a 3 percent decrease in price results in

When demand is inelastic,the price elasticity of demand is

When demand is perfectly inelastic,the price elasticity of demand

The smaller the price elasticity of demand,the

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

If the price elasticity of demand for a good is 1.4,then a 14 percent increase in the quantity demanded must be the result of

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B