Question 1

Income elasticity of demand is defined as

Accepted Answer

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

Question 2

When the absolute price elasticity of demand is greater than 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 3

For a linear demand curve, where is the amount of total expenditures on a good maximized?

Accepted Answer

For a linear demand curve, total expendi

Question 4

When the absolute price elasticity of demand equals 0.9, 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 5

Supply will become more elastic when

Accepted Answer

A)  a time period lengthens. 
B)  the time period shortens. 
C)  the good is important to consumers. 
D)  there are good substitutes for the goods. 
A)  a time period lengthens. 
B)  the time period shortens. 
C)  the good is important to consumers. 
D)  there are good substitutes for the goods.

Question 6

-Use the above table. Based on the information in the table, artisan bread is a(n)

Accepted Answer

A)  normal good. 
B)  necessary good. 
C)  inferior good. 
D)  negative good. 
A)  normal good. 
B)  necessary good. 
C)  inferior good. 
D)  negative good.

Question 7

Other things being equal, demand is more elastic if

Accepted Answer

A)  the good is less expensive the good. 
B)  the time period for adjustment is shorter. 
C)  a family spends a larger percentage of its budget on the good. 
D)  the good is more unique. 
A)  the good is less expensive the good. 
B)  the time period for adjustment is shorter. 
C)  a family spends a larger percentage of its budget on the good. 
D)  the good is more unique.

Question 8

If the price of hotdogs increases by 10 percent and the quantity supplied by meat packing companies increases by 15 percent, what is the price elasticity of supply?

Accepted Answer

A)  1.65 
B)  1.20 
C)  0.67 
D)  1.50 
A)  1.65 
B)  1.20 
C)  0.67 
D)  1.50

Question 9

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 10

A value of the absolute price elasticity of demand equal to 0.5 indicates that

Accepted Answer

A)  a 0.5% decrease in price leads to a 1% increase in quantity demanded. 
B)  a 2% decrease in price leads to a 25% increase in quantity demanded. 
C)  a 1% increase in price leads to a 5% decrease in quantity demanded. 
D)  a 10% increase in price leads to a 5% decrease in quantity demanded. 
A)  a 0.5% decrease in price leads to a 1% increase in quantity demanded. 
B)  a 2% decrease in price leads to a 25% increase in quantity demanded. 
C)  a 1% increase in price leads to a 5% decrease in quantity demanded. 
D)  a 10% increase in price leads to a 5% decrease in quantity demanded.

Question 11

Compared to the long-run absolute elasticity of demand, the short-run absolute elasticity of demand is

Accepted Answer

A)  smaller. 
B)  the same. 
C)  larger. 
D)  either smaller or larger, depending on other factors. 
A)  smaller. 
B)  the same. 
C)  larger. 
D)  either smaller or larger, depending on other factors.

Question 12

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?

Accepted Answer

A)  1.60 
B)  1.00 
C)  0.65 
D)  0.60 
A)  1.60 
B)  1.00 
C)  0.65 
D)  0.60

Question 13

The local baseball stadium's concession stands previously sold hot dogs for 80 cents apiece. At that price, when a baseball fan went to watch a baseball game, he bought 2 hotdogs. But now that the stadium has a "dime-a-dog night," he has purchased 6 hot dogs. What is the approximate value of this individual's absolute price elasticity of demand for hot dogs?

Accepted Answer

A)  0.64 
B)  0.80 
C)  1.00 
D)  1.56 
A)  0.64 
B)  0.80 
C)  1.00 
D)  1.56

Question 14

If demand is elastic and the price of a product decreases by 100 percent, then

Accepted Answer

A)  the change in quantity demanded is less than 100 percent. 
B)  the change in quantity demanded is equal to 100 percent. 
C)  the change in quantity demanded is greater than 100 percent. 
D)  the decrease in quantity demanded is greater than 0 percent. 
A)  the change in quantity demanded is less than 100 percent. 
B)  the change in quantity demanded is equal to 100 percent. 
C)  the change in quantity demanded is greater than 100 percent. 
D)  the decrease in quantity demanded is greater than 0 percent.

Question 15

A measure of the responsiveness of demand to changes in income, all other things being constant, is

Accepted Answer

A)  income elasticity of demand. 
B)  price income elasticity of demand. 
C)  price elasticity of demand. 
D)  cross price elasticity of demand. 
A)  income elasticity of demand. 
B)  price income elasticity of demand. 
C)  price elasticity of demand. 
D)  cross price elasticity of demand.

Question 16

When a household spends over 70% of its monthly 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 17

If a good's price increases by 2 percent, then its quantity supplied increases by more than 2 percent. This means

Accepted Answer

A)  supply is elastic. 
B)  supply is unit-elastic. 
C)  supply is inelastic. 
D)  the good has good substitutes. 
A)  supply is elastic. 
B)  supply is unit-elastic. 
C)  supply is inelastic. 
D)  the good has good substitutes.

Question 18

If the price of gasoline goes up by 50% and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.25. 
B)  0.50. 
C)  0.75. 
D)  1.00. 
A)  0.25. 
B)  0.50. 
C)  0.75. 
D)  1.00.

Question 19

We expect the price elasticity of supply to be

Accepted Answer

A)  negative. 
B)  positive. 
C)  between -1 and +1. 
D)  zero. 
A)  negative. 
B)  positive. 
C)  between -1 and +1. 
D)  zero.

Question 20

The less sensitive buyers 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)  smaller is the price elasticity of demand. 
C)  greater 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)  smaller is the price elasticity of demand. 
C)  greater the price elasticity of demand. 
D)  closer the price elasticity of demand is to one.

Exam 19: Demand and Supply Elasticity

Income elasticity of demand is defined as

When the absolute price elasticity of demand is greater than 1, demand is

For a linear demand curve, where is the amount of total expenditures on a good maximized?

When the absolute price elasticity of demand equals 0.9, demand is

Supply will become more elastic when

-Use the above table. Based on the information in the table, artisan bread is a(n)

Other things being equal, demand is more elastic if

If the price of hotdogs increases by 10 percent and the quantity supplied by meat packing companies increases by 15 percent, what is the price elasticity of supply?

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

A value of the absolute price elasticity of demand equal to 0.5 indicates that

Compared to the long-run absolute elasticity of demand, the short-run absolute elasticity of demand is

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?

If demand is elastic and the price of a product decreases by 100 percent, then

A measure of the responsiveness of demand to changes in income, all other things being constant, is

When a household spends over 70% of its monthly income on a good, demand will be

If a good's price increases by 2 percent, then its quantity supplied increases by more than 2 percent. This means

If the price of gasoline goes up by 50% and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is

We expect the price elasticity of supply to be

The less sensitive buyers are to a change in price, 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

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

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