Question 1

If some product has an elastic demand,then we can expect

Accepted Answer

A) a price increase to increase total revenue. 
B) total revenue to rise if price falls. 
C) that there are few substitutes for this product. 
D) the absolute value of the elasticity of demand coefficient to be less than 1. 
E) a smaller percentage change in the quantity demanded,given some percentage change in the price. 
A) a price increase to increase total revenue. 
B) total revenue to rise if price falls. 
C) that there are few substitutes for this product. 
D) the absolute value of the elasticity of demand coefficient to be less than 1. 
E) a smaller percentage change in the quantity demanded,given some percentage change in the price.

Question 2

Why isn't the slope of a demand curve used to measure the sensitivity of demand to a price change?

Accepted Answer

Slope is dependent on absolute measures

Question 3

The price elasticity of demand measures the change in quantity demanded given a dollar change in price.

Accepted Answer

A) True 
 B)False

Question 4

If the producers of a product do not respond to price changes at all,then an increase in demand results in

Accepted Answer

A) no change in price but a large increase in equilibrium quantity. 
B) an increase in price but no change in equilibrium quantity. 
C) as much an increase in price as in equilibrium quantity. 
D) no change in both price and equilibrium quantity. 
E) a large increase in price and a large decrease in equilibrium quantity . 
A) no change in price but a large increase in equilibrium quantity. 
B) an increase in price but no change in equilibrium quantity. 
C) as much an increase in price as in equilibrium quantity. 
D) no change in both price and equilibrium quantity. 
E) a large increase in price and a large decrease in equilibrium quantity .

Question 5

Because there are few substitutes for insulin,we expect the price elasticity of demand for insulin to be fairly elastic.

Accepted Answer

A) True 
 B)False

Question 6

The price elasticity of demand is a more precise measure of the slope of a demand curve.

Accepted Answer

A) True 
 B)False

Question 7

The size of the price elasticity of demand is important to determine how much market price will change in response to a shift in the supply.

Accepted Answer

A) True 
 B)False

Question 8

When price elasticity of demand for a good equals 0,it is said to be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 9

Calculate the price elasticity using the midpoint formula for the following demand when price changes from $200 to $240: Qd = 625 - .25P.

Accepted Answer

625 - .25(240)= 565

Question 10

The size of the price elasticity of demand is important to determine how much market price will change in response to a shift in the supply.

Accepted Answer

A) True 
 B)False

Question 11

A price floor would result in a(n)

Accepted Answer

A) surplus. 
B) shortage. 
C) increase in equilibrium price. 
D) decrease in equilibrium price. 
E) shift of the demand curve to the right. 
A) surplus. 
B) shortage. 
C) increase in equilibrium price. 
D) decrease in equilibrium price. 
E) shift of the demand curve to the right.

Question 12

Explain how price elasticity of demand indicates how total revenue changes when there is a change in price.

Accepted Answer

Total revenue equals P @#LAT-DLM& Q_d.Th

Question 13

The income elasticity of demand

Accepted Answer

A) is usually zero because "you can only have so much." 
B) could be positive or negative or zero,depending on the nature of the good. 
C) can never be zero. 
D) must be positive because consumers tend to buy more at higher incomes. 
E) must be negative because of the law of increasing cost. 
A) is usually zero because "you can only have so much." 
B) could be positive or negative or zero,depending on the nature of the good. 
C) can never be zero. 
D) must be positive because consumers tend to buy more at higher incomes. 
E) must be negative because of the law of increasing cost.

Question 14

Suppose the government sets beef prices,which in effect creates a price floor.Draw a supply and demand diagram for the beef market where the price is fixed greater than the market equilibrium price.Will there be a shortage or a surplus?

Accepted Answer

Setting a price floo

Question 15

Suppose that,as the price of wheat falls from $10 to $8,the quantity demanded of wheat increases from 100 bushels to 150 bushels.Using the midpoint formula,the price elasticity of demand for wheat is 1.8.

Accepted Answer

A) True 
 B)False

Question 16

If the price elasticity of demand for computers is greater than 1,then an increase in computer prices will

Accepted Answer

A) lower total revenue. 
B) raise total revenue. 
C) not change total revenue. 
D) either raise or lower total revenue,depending on the starting price. 
E) lead to a higher percentage change in total revenue than the percentage change in price. 
A) lower total revenue. 
B) raise total revenue. 
C) not change total revenue. 
D) either raise or lower total revenue,depending on the starting price. 
E) lead to a higher percentage change in total revenue than the percentage change in price.

Question 17

If a 2 percent increase in price results in a 1 percent increase in the quantity supplied,the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 18

A manager wishes to increase revenues.One suggestion is to cut prices; another is to raise prices.What are the assumptions each suggestion is based on?

Accepted Answer

The first suggestion is based on the ass

Question 19

The concept of price elasticity of demand makes it possible to

Accepted Answer

A) predict how much demand will shift with a change in price. 
B) predict how much price will change with a change in demand. 
C) predict how much price will change with a change in supply. 
D) predict how much supply will shift with a change in price. 
E) anticipate shifts in demand. 
A) predict how much demand will shift with a change in price. 
B) predict how much price will change with a change in demand. 
C) predict how much price will change with a change in supply. 
D) predict how much supply will shift with a change in price. 
E) anticipate shifts in demand.

Question 20

Exhibit 4-1  
-Refer to Exhibit 4-1.The price elasticity of demand is most likely to be inelastic

Accepted Answer

A) at point A. 
B) at point B. 
C) at point C. 
D) anywhere along the demand curve. 
E) nowhere along the demand curve. 
A) at point A. 
B) at point B. 
C) at point C. 
D) anywhere along the demand curve. 
E) nowhere along the demand curve.

Exam 4: Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

If some product has an elastic demand,then we can expect

Why isn't the slope of a demand curve used to measure the sensitivity of demand to a price change?

The price elasticity of demand measures the change in quantity demanded given a dollar change in price.

If the producers of a product do not respond to price changes at all,then an increase in demand results in

Because there are few substitutes for insulin,we expect the price elasticity of demand for insulin to be fairly elastic.

The price elasticity of demand is a more precise measure of the slope of a demand curve.

The size of the price elasticity of demand is important to determine how much market price will change in response to a shift in the supply.

When price elasticity of demand for a good equals 0,it is said to be perfectly inelastic.

Calculate the price elasticity using the midpoint formula for the following demand when price changes from $200 to $240: Qd = 625 - .25P.

The size of the price elasticity of demand is important to determine how much market price will change in response to a shift in the supply.

A price floor would result in a(n)

Explain how price elasticity of demand indicates how total revenue changes when there is a change in price.

The income elasticity of demand

Suppose the government sets beef prices,which in effect creates a price floor.Draw a supply and demand diagram for the beef market where the price is fixed greater than the market equilibrium price.Will there be a shortage or a surplus?

Suppose that,as the price of wheat falls from $10 to $8,the quantity demanded of wheat increases from 100 bushels to 150 bushels.Using the midpoint formula,the price elasticity of demand for wheat is 1.8.

If the price elasticity of demand for computers is greater than 1,then an increase in computer prices will

If a 2 percent increase in price results in a 1 percent increase in the quantity supplied,the price elasticity of supply is 2.

A manager wishes to increase revenues.One suggestion is to cut prices; another is to raise prices.What are the assumptions each suggestion is based on?

The concept of price elasticity of demand makes it possible to

Exhibit 4-1 -Refer to Exhibit 4-1.The price elasticity of demand is most likely to be inelastic

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

Filters

Calculate the price elasticity using the midpoint formula for the following demand when price changes from $200 to $240: Q_d = 625 - .25P.