Question 1

Which of the following is likely to have the most price elastic demand?

Accepted Answer

A) laptop computers 
B) tablets 
C) Microsoft® Surface tablets 
D) cell phones 
A) laptop computers 
B) tablets 
C) Microsoft® Surface tablets 
D) cell phones

Question 2

When demand is inelastic,an increase in price will cause

Accepted Answer

A) an increase in total revenue. 
B) a decrease in total revenue. 
C) no change in total revenue but an increase in quantity demanded. 
D) no change in total revenue but a decrease in quantity demanded. 
A) an increase in total revenue. 
B) a decrease in total revenue. 
C) no change in total revenue but an increase in quantity demanded. 
D) no change in total revenue but a decrease in quantity demanded.

Question 3

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

Accepted Answer

A) ignoring the law of demand. 
B) assuming that the demand for university education is elastic. 
C) assuming that the demand for university education is inelastic. 
D) assuming that the supply of university education is elastic. 
A) ignoring the law of demand. 
B) assuming that the demand for university education is elastic. 
C) assuming that the demand for university education is inelastic. 
D) assuming that the supply of university education is elastic.

Question 4

When the price of chai tea lattés is $5,Maxine buys 20 per month.When the price is $4,she buys 30 per month.Maxine's demand for chai tea lattés is

Accepted Answer

A) elastic,and her demand curve would be relatively flat. 
B) elastic,and her demand curve would be relatively steep. 
C) inelastic,and her demand curve would be relatively flat. 
D) inelastic,and her demand curve would be relatively steep. 
A) elastic,and her demand curve would be relatively flat. 
B) elastic,and her demand curve would be relatively steep. 
C) inelastic,and her demand curve would be relatively flat. 
D) inelastic,and her demand curve would be relatively steep.

Question 5

If the price elasticity of demand for a good is 4,then a 12 percent decrease in price results in a

Accepted Answer

A) 0.33 percent increase in the quantity demanded. 
B) 3 percent increase in the quantity demanded. 
C) 30 percent increase in the quantity demanded. 
D) 48 percent increase in the quantity demanded. 
A) 0.33 percent increase in the quantity demanded. 
B) 3 percent increase in the quantity demanded. 
C) 30 percent increase in the quantity demanded. 
D) 48 percent increase in the quantity demanded.

Question 6

Jerome says that he will spend exactly $25 each month on new apps for his mobile device,regardless of the price of apps.Jerome's demand for apps is

Accepted Answer

A) perfectly elastic. 
B) unit elastic. 
C) perfectly inelastic. 
D) somewhat inelastic,but not perfectly inelastic. 
A) perfectly elastic. 
B) unit elastic. 
C) perfectly inelastic. 
D) somewhat inelastic,but not perfectly inelastic.

Question 7

If the cross-price elasticity of two goods is positive,then the two goods are

Accepted Answer

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

Question 8

For a particular good,a 12 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is narrowly defined. 
D) The relevant time horizon is long. 
A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is narrowly defined. 
D) The relevant time horizon is long.

Question 9

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.Your mother is paying for all of the ingredients.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

Accepted Answer

A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question. 
A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question.

Question 10

Figure 5-8  
-Refer to Figure 5-8.An increase in price from $15 to $20 would

Accepted Answer

A) increase total revenue by $500 
B) decrease total revenue by $500. 
C) increase total revenue by $1,000. 
D) decrease total revenue by $1,000. 
A) increase total revenue by $500 
B) decrease total revenue by $500. 
C) increase total revenue by $1,000. 
D) decrease total revenue by $1,000.

Question 11

Suppose that 300 bottles of soda are demanded at a particular price.If the price of a bottle of soda rises from that price by 6 percent,the number of bottles of soda demanded falls to 275.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A) demand for bottles of soda in this price range is perfectly elastic. 
B) price increase will increase the total revenue of soda sellers. 
C) price elasticity of demand for bottles of soda in this price range is about 0.69. 
D) price elasticity of demand for bottles of soda in this price range is about 1.45. 
A) demand for bottles of soda in this price range is perfectly elastic. 
B) price increase will increase the total revenue of soda sellers. 
C) price elasticity of demand for bottles of soda in this price range is about 0.69. 
D) price elasticity of demand for bottles of soda in this price range is about 1.45.

Question 12

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A) positive. 
B) negative. 
C) either positive or negative.It depends whether A and B are normal goods or inferior goods. 
D) either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve. 
A) positive. 
B) negative. 
C) either positive or negative.It depends whether A and B are normal goods or inferior goods. 
D) either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

Question 13

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A) An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B) A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C) A decrease in price of 2% causes a decrease in total revenue of 0%. 
D) An increase in price of 2% causes a decrease in quantity demanded of 1/2%. 
A) An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B) A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C) A decrease in price of 2% causes a decrease in total revenue of 0%. 
D) An increase in price of 2% causes a decrease in quantity demanded of 1/2%.

Question 14

The price elasticity of demand measures

Accepted Answer

A) buyers' responsiveness to a change in the price of a good. 
B) the extent to which demand increases as additional buyers enter the market. 
C) how much more of a good consumers will demand when incomes rise. 
D) the movement along a supply curve when there is a change in demand. 
A) buyers' responsiveness to a change in the price of a good. 
B) the extent to which demand increases as additional buyers enter the market. 
C) how much more of a good consumers will demand when incomes rise. 
D) the movement along a supply curve when there is a change in demand.

Question 15

If the price elasticity of demand for apples is 0.8,then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Accepted Answer

A) 1.92%,and apples sellers' total revenue will increase as a result. 
B) 1.92%,and apples sellers' total revenue will decrease as a result. 
C) 3%,and apples sellers' total revenue will increase as a result. 
D) 3%,and apples sellers' total revenue will decrease as a result. 
A) 1.92%,and apples sellers' total revenue will increase as a result. 
B) 1.92%,and apples sellers' total revenue will decrease as a result. 
C) 3%,and apples sellers' total revenue will increase as a result. 
D) 3%,and apples sellers' total revenue will decrease as a result.

Question 16

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

Accepted Answer

A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit. 
A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit.

Question 17

The price elasticity of demand for bread is

Accepted Answer

A) computed as the change in the price of bread divided by the change in the quantity demanded of bread. 
B) independent of the availability of close substitutes. 
C) influenced by whether consumers view bread as a necessity or luxury. 
D) All of the above are correct. 
A) computed as the change in the price of bread divided by the change in the quantity demanded of bread. 
B) independent of the availability of close substitutes. 
C) influenced by whether consumers view bread as a necessity or luxury. 
D) All of the above are correct.

Question 18

Elasticity of demand is closely related to the slope of the demand curve.The less responsive buyers are to a change in price,the

Accepted Answer

A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit. 
A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit.

Question 19

For a particular good,a 5 percent increase in price causes a 15 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is short. 
A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is short.

Question 20

Figure 5-2  
-Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

Accepted Answer

A) D1 
B) D2 
C) D3 
D) All of the above are equally elastic. 
A) D1 
B) D2 
C) D3 
D) All of the above are equally elastic.

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

Which of the following is likely to have the most price elastic demand?

When demand is inelastic,an increase in price will cause

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

When the price of chai tea lattés is $5,Maxine buys 20 per month.When the price is $4,she buys 30 per month.Maxine's demand for chai tea lattés is

If the price elasticity of demand for a good is 4,then a 12 percent decrease in price results in a

Jerome says that he will spend exactly $25 each month on new apps for his mobile device,regardless of the price of apps.Jerome's demand for apps is

If the cross-price elasticity of two goods is positive,then the two goods are

For a particular good,a 12 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Figure 5-8 -Refer to Figure 5-8.An increase in price from $15 to $20 would

Suppose that 300 bottles of soda are demanded at a particular price.If the price of a bottle of soda rises from that price by 6 percent,the number of bottles of soda demanded falls to 275.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

In which of these instances is demand said to be perfectly inelastic?

The price elasticity of demand measures

If the price elasticity of demand for apples is 0.8,then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

The price elasticity of demand for bread is

Elasticity of demand is closely related to the slope of the demand curve.The less responsive buyers are to a change in price,the

For a particular good,a 5 percent increase in price causes a 15 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

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