Question 1

Price elasticity of demand is the responsiveness of

Accepted Answer

A)  the quantity demanded to a change in price. 
B)  demand to a change in supply. 
C)  demand to a change in income. 
D)  demand for a good to a change in the demand for another good. 
A)  the quantity demanded to a change in price. 
B)  demand to a change in supply. 
C)  demand to a change in income. 
D)  demand for a good to a change in the demand for another good.

Question 2

-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $9 to $9.50?

Accepted Answer

A)  0.35 
B)  0.55 
C)  2.57 
D)  2.85 
A)  0.35 
B)  0.55 
C)  2.57 
D)  2.85

Question 3

If the absolute price elasticity of demand is equal to 1 in the short run, then in the long run, other things being equal, the absolute price elasticity of demand will be

Accepted Answer

A)  less than one. 
B)  less than zero. 
C)  greater than one. 
D)  equal to zero. 
A)  less than one. 
B)  less than zero. 
C)  greater than one. 
D)  equal to zero.

Question 4

Absolute price elasticities are calculated for four goods, and the values are: 0.009; 1.0; 3.5; and 4. Which indicates the most price-responsive situation?

Accepted Answer

A)  0.009 
B)  1.0 
C)  3.5 
D)  4.0 
A)  0.009 
B)  1.0 
C)  3.5 
D)  4.0

Question 5

When the calculated price elasticity of demand is -0.85, demand is

Accepted Answer

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

Question 6

-Use the above figure. Which graph depicts an inferior good?

Accepted Answer

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

Question 7

The price elasticity of supply

Accepted Answer

A)  is the slope of the supply curve. 
B)  is the percentage change in quantity supplied divided by the percentage change in price. 
C)  is always negative. 
D)  does not vary between the long and the short run. 
A)  is the slope of the supply curve. 
B)  is the percentage change in quantity supplied divided by the percentage change in price. 
C)  is always negative. 
D)  does not vary between the long and the short run.

Question 8

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)  Dr. Pepper cola 
D)  gasoline 
A)  salt 
B)  tickets to the Super Bowl 
C)  Dr. Pepper cola 
D)  gasoline

Question 9

-Refer to the above table. Suppose the price of B rises from $18 to $20. What is the cross price elasticity of demand between B and C?

Accepted Answer

A)  -1.7273 
B)  -1.1176 
C)  -0.8947 
D)  +1.7273 
A)  -1.7273 
B)  -1.1176 
C)  -0.8947 
D)  +1.7273

Question 10

Why can cross price elasticity of demand be positive or negative, unlike the price elasticity of demand with respect to the item's own price?

Accepted Answer

Cross price elasticity of demand is the

Question 11

After full adjustment to a price change has occurred, the absolute price elasticity of demand for an item is equal to 1.5. In the short run, the absolute price elasticity of demand for the item was probably

Accepted Answer

A)  less than 0. 
B)  greater than 0. 
C)  less than 1.5. 
D)  greater than 1.5. 
A)  less than 0. 
B)  greater than 0. 
C)  less than 1.5. 
D)  greater than 1.5.

Question 12

The demand curve for gasoline should be

Accepted Answer

A)  more elastic in the long run than in the short run. 
B)  less elastic in the long run than in the short run. 
C)  as elastic in the long run as it is in the short run. 
D)  more or less elastic in the long run versus the short run depending upon supply conditions. 
A)  more elastic in the long run than in the short run. 
B)  less elastic in the long run than in the short run. 
C)  as elastic in the long run as it is in the short run. 
D)  more or less elastic in the long run versus the short run depending upon supply conditions.

Question 13

If demand is perfectly elastic everywhere along the demand curve, then

Accepted Answer

A)  people must be irrational. 
B)  the demand curve is vertical. 
C)  the demand curve is a rectangular hyperbola. 
D)  the demand curve is horizontal. 
A)  people must be irrational. 
B)  the demand curve is vertical. 
C)  the demand curve is a rectangular hyperbola. 
D)  the demand curve is horizontal.

Question 14

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

Accepted Answer

A)  a luxury sport utility vehicle 
B)  utilities 
C)  chewing gum 
D)  a smartphone 
A)  a luxury sport utility vehicle 
B)  utilities 
C)  chewing gum 
D)  a smartphone

Question 15

Suppose that the demand for movie tickets is price inelastic for the range of prices between $10 and $12. If a movie theater raises the price of tickets from $10 to $12, what will happen to total revenues?

Accepted Answer

A)  Total revenues will decrease. 
B)  Total revenues will increase. 
C)  Total revenues will not change. 
D)  Total revenues will have no relationship to the quantity of ties demanded. 
A)  Total revenues will decrease. 
B)  Total revenues will increase. 
C)  Total revenues will not change. 
D)  Total revenues will have no relationship to the quantity of ties demanded.

Question 16

The absolute price elasticity of demand for a product for which annual expenditures make up a very small share of a typical consumer's budget is probably

Accepted Answer

A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  infinity. 
A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  infinity.

Question 17

The cross elasticity of demand is

Accepted Answer

A)  the percentage change in the demand of one good divided by the percentage change in price of another good. 
B)  the change in the price of one good divided by the change of quantity demanded of another good. 
C)  the percentage change in the quantity demanded of one good divided by the percentage change in the quantity demanded of another good. 
D)  the percentage change in the price of one good divided by the percentage change in the price of another good. 
A)  the percentage change in the demand of one good divided by the percentage change in price of another good. 
B)  the change in the price of one good divided by the change of quantity demanded of another good. 
C)  the percentage change in the quantity demanded of one good divided by the percentage change in the quantity demanded of another good. 
D)  the percentage change in the price of one good divided by the percentage change in the price of another good.

Question 18

When total revenue remain unchanged when there is a change in price, demand is

Accepted Answer

A)  unit-elastic. 
B)  inelastic. 
C)  elastic. 
D)  not related. 
A)  unit-elastic. 
B)  inelastic. 
C)  elastic. 
D)  not related.

Question 19

When the consumer spends less than 1% 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 20

If demand for Tesla automobiles rises in an area where incomes have increased, this tells us that a Tesla is

Accepted Answer

A)  a normal good. 
B)  an inferior good. 
C)  a complementary good. 
D)  a substitute good. 
A)  a normal good. 
B)  an inferior good. 
C)  a complementary good. 
D)  a substitute good.

Exam 19: Demand and Supply Elasticity

Price elasticity of demand is the responsiveness of

-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $9 to $9.50?

If the absolute price elasticity of demand is equal to 1 in the short run, then in the long run, other things being equal, the absolute price elasticity of demand will be

Absolute price elasticities are calculated for four goods, and the values are: 0.009; 1.0; 3.5; and 4. Which indicates the most price-responsive situation?

When the calculated price elasticity of demand is -0.85, demand is

-Use the above figure. Which graph depicts an inferior good?

The price elasticity of supply

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

-Refer to the above table. Suppose the price of B rises from $18 to $20. What is the cross price elasticity of demand between B and C?

Why can cross price elasticity of demand be positive or negative, unlike the price elasticity of demand with respect to the item's own price?

After full adjustment to a price change has occurred, the absolute price elasticity of demand for an item is equal to 1.5. In the short run, the absolute price elasticity of demand for the item was probably

The demand curve for gasoline should be

If demand is perfectly elastic everywhere along the demand curve, then

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

Suppose that the demand for movie tickets is price inelastic for the range of prices between $10 and $12. If a movie theater raises the price of tickets from $10 to $12, what will happen to total revenues?

The absolute price elasticity of demand for a product for which annual expenditures make up a very small share of a typical consumer's budget is probably

The cross elasticity of demand is

When total revenue remain unchanged when there is a change in price, demand is

When the consumer spends less than 1% of his income on a good, demand will be

If demand for Tesla automobiles rises in an area where incomes have increased, this tells us that a Tesla is

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

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

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

Filters