Question 1

If the quantity supplied stays the same no matter what the price is, then supply is

Accepted Answer

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

Question 2

Which of the following is FALSE regarding inelastic demand?

Accepted Answer

A)  Price elasticity of demand is less than 1 (Ep  1). 
D)  If a firm lowers price, total revenues will fall. 
A)  Price elasticity of demand is less than 1 (Ep  1). 
D)  If a firm lowers price, total revenues will fall.

Question 3

Suppose that the cross price elasticity of demand between goods Y and Z equals 1.5. Which of the following is TRUE?

Accepted Answer

A)  Goods Y and Z are complements because the cross price elasticity is greater than one. 
B)  Goods Y and Z are complements because the cross price elasticity is positive. 
C)  Goods Y and Z are substitutes because the cross price elasticity is greater than one. 
D)  Goods Y and Z are substitutes because the cross price elasticity is positive. 
A)  Goods Y and Z are complements because the cross price elasticity is greater than one. 
B)  Goods Y and Z are complements because the cross price elasticity is positive. 
C)  Goods Y and Z are substitutes because the cross price elasticity is greater than one. 
D)  Goods Y and Z are substitutes because the cross price elasticity is positive.

Question 4

What does a perfectly elastic demand curve look like? A perfectly inelastic demand curve? Explain.

Accepted Answer

A perfectly elastic demand curve is hori

Question 5

The most important determinant of the elasticity of supply is

Accepted Answer

A)  whether the good is a durable good or a nondurable good. 
B)  the price of the good. 
C)  the time period firms have to adjust to the new price. 
D)  the proportion of the good in the budget of consumers. 
A)  whether the good is a durable good or a nondurable good. 
B)  the price of the good. 
C)  the time period firms have to adjust to the new price. 
D)  the proportion of the good in the budget of consumers.

Question 6

If the price of oranges went up by 20 percent, which of the following values of the cross price elasticity for apples would be most reasonable to anticipate?

Accepted Answer

A)  0.0 
B)  1.2 
C)  -2.0 
D)  -0.2 
A)  0.0 
B)  1.2 
C)  -2.0 
D)  -0.2

Question 7

If there is no response in quantity demanded to a change in price, demand is

Accepted Answer

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

Question 8

If price decreases by 10 percent and quantity demanded increases by 3 percent, the price elasticity of demand will be

Accepted Answer

A)  3. 
B)  0.3. 
C)  3.33. 
D)  300. 
A)  3. 
B)  0.3. 
C)  3.33. 
D)  300.

Question 9

Why is elasticity of demand greater for goods that are a large share of a consumer's budget?

Accepted Answer

The greater the share of a consumer's bu

Question 10

Other things being equal, the longer a price change persists

Accepted Answer

A)  the less is the elasticity of demand. 
B)  the less chance a consumer will be able to adjust. 
C)  the more the consumer will be willing to pay. 
D)  the greater is the elasticity of demand. 
A)  the less is the elasticity of demand. 
B)  the less chance a consumer will be able to adjust. 
C)  the more the consumer will be willing to pay. 
D)  the greater is the elasticity of demand.

Question 11

The price elasticity of demand is

Accepted Answer

A)  always positive, so there is no reason to consider the absolute value of the price elasticity of demand. 
B)  always negative, but by convention, economists typically express the price elasticity of demand as an absolute value. 
C)  always equal to -1, which by convention economists typically express as an absolute value, or 1. 
D)  always equal to zero, so there is no reason to consider the absolute value of the price elasticity of demand. 
A)  always positive, so there is no reason to consider the absolute value of the price elasticity of demand. 
B)  always negative, but by convention, economists typically express the price elasticity of demand as an absolute value. 
C)  always equal to -1, which by convention economists typically express as an absolute value, or 1. 
D)  always equal to zero, so there is no reason to consider the absolute value of the price elasticity of demand.

Question 12

If the prices of computer tablets rise, we would expect the number of tablet covers purchased to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  be equal to ten. 
D)  be equal to one. 
A)  increase. 
B)  decrease. 
C)  be equal to ten. 
D)  be equal to one.

Question 13

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

Accepted Answer

A)  0.72 
B)  0.79 
C)  1.38 
D)  5.0 
A)  0.72 
B)  0.79 
C)  1.38 
D)  5.0

Question 14

A perfectly elastic demand curve

Accepted Answer

A)  shows that a slight change in income will lead to a large reduction in price. 
B)  is a vertical line drawn across from the quantity axis. 
C)  shows that a slight increase in price will reduce quantity demanded to zero. 
D)  has a slope of -1. 
A)  shows that a slight change in income will lead to a large reduction in price. 
B)  is a vertical line drawn across from the quantity axis. 
C)  shows that a slight increase in price will reduce quantity demanded to zero. 
D)  has a slope of -1.

Question 15

The responsiveness of demand to changes in income holding the good's relative price constant is

Accepted Answer

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

Question 16

Which of the following goods is most likely to have the lowest price elasticity?

Accepted Answer

A)  movie tickets 
B)  DVD rentals 
C)  tap water 
D)  pasta 
A)  movie tickets 
B)  DVD rentals 
C)  tap water 
D)  pasta

Question 17

When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

Accepted Answer

A)  0.15. 
B)  0.60. 
C)  0.73. 
D)  1.67. 
A)  0.15. 
B)  0.60. 
C)  0.73. 
D)  1.67.

Question 18

-Refer to the above figure. Demand will be inelastic when quantity is between

Accepted Answer

A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C. 
A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C.

Question 19

The income elasticity of demand is

Accepted Answer

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

Question 20

When economists want to obtain a measure of the responsiveness of quantity demanded to changes in price, they use

Accepted Answer

A)  the slope of the demand curve. 
B)  the price elasticity of demand. 
C)  the unit change in quantity demanded. 
D)  the cross-price elasticity of demand. 
A)  the slope of the demand curve. 
B)  the price elasticity of demand. 
C)  the unit change in quantity demanded. 
D)  the cross-price elasticity of demand.

Exam 19: Demand and Supply Elasticity

If the quantity supplied stays the same no matter what the price is, then supply is

Which of the following is FALSE regarding inelastic demand?

Suppose that the cross price elasticity of demand between goods Y and Z equals 1.5. Which of the following is TRUE?

What does a perfectly elastic demand curve look like? A perfectly inelastic demand curve? Explain.

The most important determinant of the elasticity of supply is

If the price of oranges went up by 20 percent, which of the following values of the cross price elasticity for apples would be most reasonable to anticipate?

If there is no response in quantity demanded to a change in price, demand is

If price decreases by 10 percent and quantity demanded increases by 3 percent, the price elasticity of demand will be

Why is elasticity of demand greater for goods that are a large share of a consumer's budget?

Other things being equal, the longer a price change persists

The price elasticity of demand is

If the prices of computer tablets rise, we would expect the number of tablet covers purchased to

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

A perfectly elastic demand curve

The responsiveness of demand to changes in income holding the good's relative price constant is

Which of the following goods is most likely to have the lowest price elasticity?

When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

-Refer to the above figure. Demand will be inelastic when quantity is between

The income elasticity of demand is

When economists want to obtain a measure of the responsiveness of quantity demanded to changes in price, they use

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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