Question 1

If the demand for liquor is elastic, and the government increases liquor tax, then _____.

Accepted Answer

A) most of the tax will be paid by the consumer 
B) most of the tax will be paid by the producer 
C) all of the tax will be paid by the consumer 
D) all of the tax will be paid by the producer 
E) the tax will be paid by the retailer 
A) most of the tax will be paid by the consumer 
B) most of the tax will be paid by the producer 
C) all of the tax will be paid by the consumer 
D) all of the tax will be paid by the producer 
E) the tax will be paid by the retailer

Question 2

If a 1 percent change in the price of a good causes a 1 percent change in the quantity demanded of that good, then demand is said t be:

Accepted Answer

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

Question 3

If the demand for corn is elastic, then:

Accepted Answer

A) there are not many substitutes in the consumption of corn. 
B) the price elasticity of demand for corn is greater than 1. 
C) a decrease in price will reduce total revenue for corn producers. 
D) a decrease in price will increase total revenue for corn producers. 
E) consumers will continue buying the same quantity even if price increases. 
A) there are not many substitutes in the consumption of corn. 
B) the price elasticity of demand for corn is greater than 1. 
C) a decrease in price will reduce total revenue for corn producers. 
D) a decrease in price will increase total revenue for corn producers. 
E) consumers will continue buying the same quantity even if price increases.

Question 4

Which of the following items is likely to have the highest positive income elasticity of demand?

Accepted Answer

A) Bread 
B) Jewelry 
C) Soap 
D) A plumber's service 
E) Table salt 
A) Bread 
B) Jewelry 
C) Soap 
D) A plumber's service 
E) Table salt

Question 5

If   = 1.50, and price decreases by 20 percent, then:

Accepted Answer

A) quantity demanded will decrease by 30 percent. 
B) quantity demanded will increase by 30 percent. 
C) total revenue will remain unchanged. 
D) total revenue will decrease. 
E) quantity demanded will increase by 3 percent. 
A) quantity demanded will decrease by 30 percent. 
B) quantity demanded will increase by 30 percent. 
C) total revenue will remain unchanged. 
D) total revenue will decrease. 
E) quantity demanded will increase by 3 percent.

Question 6

In order to avoid problems involved with calculating percentage changes over a wide range, economists use the base or midpoint formula to calculate percent changes when measuring the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 7

The price elasticity of demand is the ratio of the change in quantity demanded to the change in price.

Accepted Answer

A) True 
 B)False

Question 8

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10.
Given the above equation, the income elasticity of demand for noodles is _____.

Accepted Answer

A) 5 
B) 0.5 
C) 2 
D) 2.5 
E) 1.6 
A) 5 
B) 0.5 
C) 2 
D) 2.5 
E) 1.6

Question 9

The coefficient of the price elasticity of demand is always negative.

Accepted Answer

A) True 
 B)False

Question 10

There are some special types of goods for which supply cannot change irrespective of the length of time allowed for change, such as Beethoven symphonies.The price elasticity of supply for these goods is _____.

Accepted Answer

A) infinite 
B) nonexistent 
C) negative 
D) zero 
E) unity 
A) infinite 
B) nonexistent 
C) negative 
D) zero 
E) unity

Question 11

Which of the following is explained by the price elasticity of demand?

Accepted Answer

A) The effect of price changes on supply. 
B) The effect of quantity changes on supply. 
C) The effect of quantity changes on price. 
D) The effect of price changes on quantity demanded. 
E) The effect of price changes on quantity supplied. 
A) The effect of price changes on supply. 
B) The effect of quantity changes on supply. 
C) The effect of quantity changes on price. 
D) The effect of price changes on quantity demanded. 
E) The effect of price changes on quantity supplied.

Question 12

Other things remaining unchanged, the longer the time period under consideration the greater will be the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 13

When income elasticity of demand is a negative number, one can correctly conclude that:

Accepted Answer

A) the good is a normal good. 
B) the good is an inferior good. 
C) the good is a substitute. 
D) the good is a complement. 
E) total revenue will decrease when the price increases. 
A) the good is a normal good. 
B) the good is an inferior good. 
C) the good is a substitute. 
D) the good is a complement. 
E) total revenue will decrease when the price increases.

Question 14

Arc elasticity is calculated as _____.

Accepted Answer

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

Question 15

The social security tax, like any other tax, is shared by employers and employees based on elasticities of demand and supply.If the wage elasticity of demand for labor is zero and the wage elasticity of supply for labor is positive:

Accepted Answer

A) most of the tax will be paid by the employer. 
B) most of the tax will be paid by the employee. 
C) all of the tax will be paid by the employer. 
D) all of the tax will be paid by the employee. 
E) the tax is split evenly between the employer and employee. 
A) most of the tax will be paid by the employer. 
B) most of the tax will be paid by the employee. 
C) all of the tax will be paid by the employer. 
D) all of the tax will be paid by the employee. 
E) the tax is split evenly between the employer and employee.

Question 16

Price elasticity of demand measures the responsiveness of quantity demanded in a market to a change in price.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true of price elasticity of demand?

Accepted Answer

A) It measures the responsiveness of quantity demanded or quantity supplied to a change in one of the determinants of demand and/or supply. 
B) It is calculated as the percentage change in the quantity demanded of a product divided by the percentage change in the price of that product. 
C) It is calculated as the percentage change in the demand for a good divided by the percentage change in income, everything else held constant. 
D) It measures the responsiveness of demand to a change in the quantity supplied. 
E) It is calculated as the percentage change in the quantity demanded for one good divided by the percentage change in the price of a related good, everything else held constant. 
A) It measures the responsiveness of quantity demanded or quantity supplied to a change in one of the determinants of demand and/or supply. 
B) It is calculated as the percentage change in the quantity demanded of a product divided by the percentage change in the price of that product. 
C) It is calculated as the percentage change in the demand for a good divided by the percentage change in income, everything else held constant. 
D) It measures the responsiveness of demand to a change in the quantity supplied. 
E) It is calculated as the percentage change in the quantity demanded for one good divided by the percentage change in the price of a related good, everything else held constant.

Question 18

If a product has an elastic demand, this means that:

Accepted Answer

A) consumers are relatively sensitive to a change in the price of the product. 
B) consumers are relatively insensitive to a change in the quantity demanded. 
C) consumers are relatively insensitive to a change in the price of the product. 
D) producers are relatively insensitive to a change in the price of the product. 
E) producers are relatively sensitive to a change in the quantity demanded. 
A) consumers are relatively sensitive to a change in the price of the product. 
B) consumers are relatively insensitive to a change in the quantity demanded. 
C) consumers are relatively insensitive to a change in the price of the product. 
D) producers are relatively insensitive to a change in the price of the product. 
E) producers are relatively sensitive to a change in the quantity demanded.

Question 19

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 5.2
  Refer to Table 5.2.What is the income elasticity of demand for automobiles?

Accepted Answer

A) 0.5 
B) 0.35 
C) 2 
D) 0.2 
E) Zero 
A) 0.5 
B) 0.35 
C) 2 
D) 0.2 
E) Zero

Question 20

If a price increase from $20 to $40 causes quantity demanded to decrease from 100 units to 50 units, one can conclude that demand for the product is _____.

Accepted Answer

A) inelastic 
B) elastic 
C) perfectly inelastic 
D) infinitely elastic 
E) unit-elastic 
A) inelastic 
B) elastic 
C) perfectly inelastic 
D) infinitely elastic 
E) unit-elastic

Exam 4: Elasticity: Demand and Supply

If the demand for liquor is elastic, and the government increases liquor tax, then _____.

If a 1 percent change in the price of a good causes a 1 percent change in the quantity demanded of that good, then demand is said t be:

If the demand for corn is elastic, then:

Which of the following items is likely to have the highest positive income elasticity of demand?

If = 1.50, and price decreases by 20 percent, then:

In order to avoid problems involved with calculating percentage changes over a wide range, economists use the base or midpoint formula to calculate percent changes when measuring the price elasticity of demand.

The price elasticity of demand is the ratio of the change in quantity demanded to the change in price.

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10. Given the above equation, the income elasticity of demand for noodles is _____.

The coefficient of the price elasticity of demand is always negative.

There are some special types of goods for which supply cannot change irrespective of the length of time allowed for change, such as Beethoven symphonies.The price elasticity of supply for these goods is _____.

Which of the following is explained by the price elasticity of demand?

Other things remaining unchanged, the longer the time period under consideration the greater will be the price elasticity of demand.

When income elasticity of demand is a negative number, one can correctly conclude that:

Arc elasticity is calculated as _____.

The social security tax, like any other tax, is shared by employers and employees based on elasticities of demand and supply.If the wage elasticity of demand for labor is zero and the wage elasticity of supply for labor is positive:

Price elasticity of demand measures the responsiveness of quantity demanded in a market to a change in price.

Which of the following is true of price elasticity of demand?

If a product has an elastic demand, this means that:

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 5.2 Refer to Table 5.2.What is the income elasticity of demand for automobiles?

If a price increase from $20 to $40 causes quantity demanded to decrease from 100 units to 50 units, one can conclude that demand for the product is _____.

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x.Assume that P = $8, I = 200, and P_x= $10. Given the above equation, the income elasticity of demand for noodles is _____.