Question 1

If the price elasticity of demand for good A is -2, then a 1% increase in

Accepted Answer

A)  consumer income will result in a 2% decrease in the demand for good A. 
B)  consumer income will result in a 2% increase in the demand for good A. 
C)  the market price of good A will result in a 2% increase in the quantity demanded of good A. 
D)  the market price of good A will result in a 2% decrease in the quantity demanded of good A. 
A)  consumer income will result in a 2% decrease in the demand for good A. 
B)  consumer income will result in a 2% increase in the demand for good A. 
C)  the market price of good A will result in a 2% increase in the quantity demanded of good A. 
D)  the market price of good A will result in a 2% decrease in the quantity demanded of good A.

Question 2

A good's price elasticity of demand can be calculated by using the formula of

Accepted Answer

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

Question 3

We generally expect the price elasticity of supply to be

Accepted Answer

A)  zero. 
B)  negative. 
C)  positive. 
D)  positive or negative, depending on demand. 
A)  zero. 
B)  negative. 
C)  positive. 
D)  positive or negative, depending on demand.

Question 4

Total revenue is

Accepted Answer

A)  price × quantity. 
B)  change in price × change in quantity. 
C)  change in price × quantity. 
D)  price × change in quantity. 
A)  price × quantity. 
B)  change in price × change in quantity. 
C)  change in price × quantity. 
D)  price × change in quantity.

Question 5

If the cross price elasticity of demand between two goods is negative, then the two goods are

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  unrelated. 
D)  independent. 
A)  substitutes. 
B)  complements. 
C)  unrelated. 
D)  independent.

Question 6

If tablets have an absolute price elasticity of 1, the demand for tablets is

Accepted Answer

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

Question 7

-Refer to the above table. The price of B decreases from $18 to $15. What is the cross price elasticity of demand between B and A?

Accepted Answer

A)  -0.73 
B)  -1.0 
C)  +1.38 
D)  +1.83 
A)  -0.73 
B)  -1.0 
C)  +1.38 
D)  +1.83

Question 8

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 9

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

Accepted Answer

A)  0.85 
B)  1.08 
C)  1.17 
D)  0.92 
A)  0.85 
B)  1.08 
C)  1.17 
D)  0.92

Question 10

When the consumer spends a large portion of her 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 11

"Income elasticity of demand is always positive." Do you agree or disagree? Explain.

Accepted Answer

Disagree. Income elasticity of demand ca

Question 12

When demand is perfectly inelastic, an increase in price will

Accepted Answer

A)  leave total revenue unchanged. 
B)  increase total revenue. 
C)  decrease total revenue. 
D)  either increase total revenue or decrease total revenue, but it is impossible to tell which. 
A)  leave total revenue unchanged. 
B)  increase total revenue. 
C)  decrease total revenue. 
D)  either increase total revenue or decrease total revenue, but it is impossible to tell which.

Question 13

Use the above table. Based on the information in the table, artisan bread is a(n)
-Use the above table. The income elasticity of jam is

Accepted Answer

A)  -0.33. 
B)  0.33. 
C)  3.00. 
D)  -3.00. 
A)  -0.33. 
B)  0.33. 
C)  3.00. 
D)  -3.00.

Question 14

Elastic demand implies

Accepted Answer

A)  that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B)  that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C)  that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D)  that a one percent decrease or increase in price induces no change in total revenue. 
A)  that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B)  that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C)  that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D)  that a one percent decrease or increase in price induces no change in total revenue.

Question 15

The cross price elasticity of demand is defined as

Accepted Answer

A)  the percentage change in the supply for one good (a shift in the supply curve) divided by the percentage change in price of a related good. 
B)  the percentage change in demand for two different commodities. 
C)  the percentage change in the demand for one good (a shift in the demand curve) divided by the percentage change in price of a related good. 
D)  the percentage change in price for two different commodities. 
A)  the percentage change in the supply for one good (a shift in the supply curve) divided by the percentage change in price of a related good. 
B)  the percentage change in demand for two different commodities. 
C)  the percentage change in the demand for one good (a shift in the demand curve) divided by the percentage change in price of a related good. 
D)  the percentage change in price for two different commodities.

Question 16

If demand is unit elastic, then

Accepted Answer

A)  a ten percent increase in price leads to a one percent decrease in quantity demanded. 
B)  the unit change in quantity demanded equals the unit change in price. 
C)  a two percent increase in price leads to a two percent decrease in quantity demanded. 
D)  an increase in price of any amount leads to quantity demanded falling to zero. 
A)  a ten percent increase in price leads to a one percent decrease in quantity demanded. 
B)  the unit change in quantity demanded equals the unit change in price. 
C)  a two percent increase in price leads to a two percent decrease in quantity demanded. 
D)  an increase in price of any amount leads to quantity demanded falling to zero.

Question 17

The responsiveness of quantity demanded of a good to changes in its price is the

Accepted Answer

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

Question 18

Which of the following statements is correct?

Accepted Answer

A)  Supply is more elastic in the short run than in long run. 
B)  Supply is more elastic in the long run than in short run. 
C)  Price elasticity of supply is constant along the supply curve. 
D)  Price elasticity of supply is always a negative number. 
A)  Supply is more elastic in the short run than in long run. 
B)  Supply is more elastic in the long run than in short run. 
C)  Price elasticity of supply is constant along the supply curve. 
D)  Price elasticity of supply is always a negative number.

Question 19

"Price elasticity measures how many more units of a good that consumers will buy given a decrease in price." Do you agree or disagree? Explain.

Accepted Answer

Disagree. Price elasticity mea

Question 20

When two goods are substitutes for each other, the cross price elasticity of demand

Accepted Answer

A)  will be negative. 
B)  will be zero. 
C)  may be either positive or negative. 
D)  will be positive. 
A)  will be negative. 
B)  will be zero. 
C)  may be either positive or negative. 
D)  will be positive.

Exam 19: Demand and Supply Elasticity

If the price elasticity of demand for good A is -2, then a 1% increase in

A good's price elasticity of demand can be calculated by using the formula of

We generally expect the price elasticity of supply to be

Total revenue is

If the cross price elasticity of demand between two goods is negative, then the two goods are

If tablets have an absolute price elasticity of 1, the demand for tablets is

-Refer to the above table. The price of B decreases from $18 to $15. What is the cross price elasticity of demand between B and A?

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

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

When the consumer spends a large portion of her income on a good, demand will be

"Income elasticity of demand is always positive." Do you agree or disagree? Explain.

When demand is perfectly inelastic, an increase in price will

Use the above table. Based on the information in the table, artisan bread is a(n) -Use the above table. The income elasticity of jam is

Elastic demand implies

The cross price elasticity of demand is defined as

If demand is unit elastic, then

The responsiveness of quantity demanded of a good to changes in its price is the

Which of the following statements is correct?

"Price elasticity measures how many more units of a good that consumers will buy given a decrease in price." Do you agree or disagree? Explain.

When two goods are substitutes for each other, the cross price elasticity of demand

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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