Deck 4: Elasticity

Question 1

If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15%,what is the percentage change in the price of Good A?

A)-10%
B)-0.10%
C)-11.50%
D)-1%
E)11.50%

Answer 1

A

Question 2

In the accompanying table,assume that the price of ice skates increases from $10 to $20 per pair.Using the midpoint method,calculate the price elasticity of demand for ice skates for hockey players.

A)-6.00
B)0.67
C)0.11
D)-0.16
E)3.00

Answer 2

D

Question 3

Nita is a devoted Coca-Cola consumer,whereas Becky can drink either Coca-Cola or Pepsi products.Nita's demand for Coca-Cola will be relatively more ________,while Becky's demand will be relatively more ________.

A)elastic; inelastic
B)unrelated to price; elastic
C)perfectly elastic; elastic
D)inelastic; elastic
E)unitary elastic; inelastic

Answer 3

D

Question 4

Price elasticity of demand measures the change in:

A)quantity demanded due to the change in price.
B)demand due to the change in price.
C)quantity demanded due to the change in price of another good/service.
D)price due to a change in quantity demanded.
E)price due to the change in demand.

Question 5

When the price of scooters drops by 5%,the quantity demanded changes by 20%.You know that the price elasticity of demand for scooters is:

A)perfectly inelastic.
B)inelastic.
C)unitary elastic.
D)elastic.
E)perfectly elastic.

Question 6

If the elasticity of demand for Good A is -3,a 33% decrease in quantity demanded of Good A results from a(n):

A)99% decrease in the price of Good A.
B)99% increase in the price of Good A.
C)11% decrease in the price of Good A.
D)11% increase in the price of Good A.
E)33% decrease in the price of Good A.

Question 7

Price elasticity of demand is measured as the:

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

Question 8

A producer knows that the price elasticity for his product is -0.5.He wants to increase quantity demanded by 30%.By what percentage does he need to change the price?

A)10%
B)6%
C)-9.5%
D)-60%
E)-6%

Question 9

Zumba classes sell all 20 participant spots at a price of $4.50 each.When the instructor raised the prices to $5.50,10 people attended the class.From the midpoint method,the price elasticity of demand for Zumba is:

A)-0.50.
B)-3.33.
C)-2.50.
D)0.20.
E)-0.20.

Question 10

At a price of $5/hour,Bob wants to hire three workers.When the price rises to $7/hour,Bob wants to hire only two workers.Bob's price elasticity of demand for workers is:

A)-0.83
B)-1.20
C)-0.33
D)-0.40
E)-0.10

Question 11

Chris runs a sporting goods store and knows that the price elasticity of demand for his sports clothing line is -1.5.He is planning to lower prices by 10%.The percentage change in quantity demanded will be:

A)15%.
B)0.15%.
C)6.66%.
D)0.06%.
E)8.50%.

Question 12

The reason that Darren buys a lot more paintings when the price of art falls is that:

A)there are many substitutes for paintings.
B)paintings are a necessity.
C)they complement his home décor.
D)his income has risen.
E)art is a luxury.

Question 13

Jill has a fixed budget and buys all of the items listed below.When will a 20% reduction in price cause her to change the amount she buys the most?

A)scented candles,regular price is $25
B)jasmine rice,regular price is $4/lb
C)GAP jeans,regular price is $75
D)flat-screen LCD TV,regular price is $400
E)living room couch,regular price is $300

Question 14

At a price of $2,the quantity demanded for pens is 12.When the price increases to $3,the quantity demanded for pens is 10.The price elasticity of demand for pens is:

A)perfectly inelastic.
B)inelastic.
C)horizontal.
D)elastic.
E)perfectly elastic.

Question 15

When the price increases by 30% and the quantity demanded drops by 30%,the price elasticity of demand is:

A)perfectly inelastic.
B)inelastic.
C)unitary elastic.
D)elastic.
E)perfectly elastic.

Question 16

If the price elasticity of demand for Good A is -0.2 and the price increases from $2.25 to $2.75,the percentage change in the quantity demanded of Good A is:

A)-100%.
B)100%.
C)4.0%
D)-4.0%.
E)unknown because not enough information is provided.

Question 17

From the accompanying table,we would expect that,for recreational skaters,the price elasticity of demand for ice skates between $10 and $20 to be ________ than that of hockey players because ________.

A)more elastic; ice skates are a normal good
B)less elastic; ice skates are an inferior good
C)the same; they both skate
D)more elastic; recreational skaters can substitute other activities
E)less elastic; hockey players need skates

Question 18

Assume that a family spends 35% of its income on housing,20% on travel-related expenses,10% on utilities,25% on health care,and 5% on miscellaneous items.Demand for which category will be most responsive to a change in price?

A)miscellaneous
B)health care
C)utilities
D)travel-related expenses
E)housing

Question 19

Henry raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per puck.Using the midpoint method,his price elasticity of demand is:

A)0.80
B)-1.25
C)-1.00
D)0.40
E)-0.80

Question 20

If your friend says,"I am never going to buy another Avicii remix again!" his price elasticity of demand for Avicii remixes is:

A)perfectly elastic.
B)perfectly inelastic.
C)elastic.
D)inelastic.
E)unitary elastic.

Question 21

Refer to the following graphs to answer the questions that follow:





Which of these graphs most likely depicts a price elasticity of demand of -5?

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

Question 22

Refer to the following graphs to answer the questions that follow:





Which of these graphs most likely depicts a price elasticity of demand of -0.2?

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

Question 23

Sellers of bottled water find that whether the price falls or rises,the quantity bought by consumers remains unchanged every week.The price elasticity of demand for bottled water is:

A)inelastic.
B)elastic.
C)perfectly inelastic.
D)perfectly elastic.
E)unitary elastic.

Question 24

When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today?

A)tomorrow
B)in 6 months
C)in 2 years
D)in 8 years
E)in 15 years

Question 25

Refer to the accompanying table.When the price drops from $5 to $3,price elasticity of demand for sushi (using the midpoint method)at an income of $30,000 is:

A)0.71.
B)0.67.
C)0.10.
D)0.33.
E)-0.67.

Question 26

Refer to the following graphs to answer the questions that follow:





Which of these graphs represents relatively price elastic demand for a good?

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

Question 27

Refer to the following graphs to answer the questions that follow:





Which of these graphs represents perfectly price inelastic demand for a good?

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

Question 28

The Sunny Softball league found that,when it changed its ticket prices from $10 to $5,there was a more than proportional but not infinite increase in attendance.The price elasticity of demand is:

A)perfectly inelastic.
B)inelastic.
C)elastic.
D)perfectly elastic.
E)unitary elastic.

Question 29

When the price elasticity of demand is elastic,a consumer is:

A)completely unresponsive to a change in price.
B)relatively unresponsive to a change in price.
C)unaffected by a change in price.
D)relatively responsive to a change in price.
E)completely responsive to a change in price.

Question 30

The local bakery calculates the price elasticity of demand for its cinnamon rolls to be -1.25.This tells them that demand is ________ and price is ________ to the buyer.

A)inelastic; less important than the quantity
B)elastic; more important than the quantity
C)unitary elastic; on the same level as quantity
D)perfectly inelastic; everything
E)perfectly elastic; meaningless

Question 31

Jane says that she will always spend $20 a week on lattes.Jane's demand for lattes is price:

A)inelastic.
B)elastic.
C)perfectly inelastic.
D)perfectly elastic.
E)unitary elastic.

Question 32

When quantity demanded and price increase by 10%,you know that price and quantity are ________ to the consumer.

A)equally important
B)everything
C)nothing
D)relatively important
E)relatively unimportant

Question 33

Assume that the market for pencils is in equilibrium and that demand is very price elastic.The popularity of digital tablets and electronic pens increases and demand for pencils declines.The equilibrium change in quantity demanded is:

A)0 (zero).
B)relatively small.
C)proportional to the shift in demand.
D)relatively large.
E)infinite.

Question 34

If a business finds that demand for its good is very price elastic,it knows that:

A)price is very important.
B)price is unimportant.
C)price is unrelated.
D)the effect of price is less important than the impact of the quantity consumers buy.
E)the quantity consumers buy is unimportant.

Question 35

There was a more than proportional decrease in quantity demanded for cupcakes when the local baker raised the price by 20%.The price elasticity of demand for cupcakes is:

A)inelastic.
B)elastic.
C)perfectly inelastic.
D)perfectly elastic.
E)unitary elastic.

Question 36

"No matter the price,I will always buy five gallons of ice cream a week.I love ice cream!" This statement reflects a price elasticity of demand that is:

A)perfectly elastic.
B)elastic.
C)unitary.
D)inelastic.
E)perfectly inelastic.

Question 37

Kevin tells the manager at Moo's Ice Cream that he won't buy any ice cream cones costing more than $2,but he will buy a limitless number at any price less than $2.His price elasticity of demand for ice cream cones is:

A)perfectly inelastic.
B)inelastic.
C)unitary elastic.
D)elastic.
E)perfectly elastic.

Question 38

Cellphone companies found that when they raised the price of connecting to wireless hot spots,demand decreased more than proportionally among casual users but decreased less than proportionally among businesspeople.This is because wireless connectivity is a(n)________ for casual users but a(n)________ for businesspeople.

A)elastic good; inelastic good
B)luxury good; necessity good
C)normal good; inferior good
D)inelastic good; elastic good
E)inferior good; normal good

Question 39

Demand is almost always more price elastic in the long run because:

A)people's preferences change.
B)newer versions of a good/service replace older ones.
C)production of the good/service stops.
D)more options become available and people can make different choices.
E)government regulations increase.

Question 40

To keep the percentage change in quantity demanded equally proportional to the percentage change in price when the prices rise by 5%,a consumer would need to ________ quantity demanded by ________.

A)increase; 5%
B)decrease; 5%
C)increase; 10%
D)decrease; 10%
E)increase; 2%

Question 41

When Heavenly Cookies prices its sugar cookies at $1.00,they sell 75 cookies.They lowered the price to $0.50 and sold 200 cookies.Their total revenue ________ because the price elasticity of demand for sugar cookies is ________.

A)rose; elastic
B)rose; inelastic
C)fell; elastic
D)fell; inelastic
E)stayed the same; unitary elastic

Question 42

Graph ________ most likely shows the price elasticity of demand for the following situation: Bob's Boots can sell out its entire stock of shoe polish at $2.50 but can sell none if it raises the price to $2.55.

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

Question 43

The local National Hockey League (NHL)team decides to lower its ticket prices in order to attract more fans.They are hoping that the:

A)price elasticity of demand is perfectly inelastic.
B)price decrease matters more than the quantity increase to total revenue.
C)quantity increase matters more than the price decrease to total revenue.
D)price elasticity of demand is unitary elastic.
E)price elasticity of demand is perfectly elastic.

Question 44

At higher prices,the price elasticity of demand is likely to be __________,whereas it is likely to be __________ at lower prices.

A)perfectly elastic; perfectly inelastic
B)elastic; inelastic
C)inelastic; elastic
D)perfectly inelastic; perfectly elastic
E)unitary elastic; elastic

Question 45

The city of Barlow is known for its wide variety of ice cream shops.What will happen if Nick's Ice Cream Palace raises the price of its shakes?

A)Demand will decrease by a greater proportion than the price.
B)Demand will increase by a greater proportion than the price.
C)The quantity demanded will decrease by a greater proportion than the price.
D)The quantity demanded will increase by a greater proportion than the price.
E)Demand will not change.

Question 46

From the accompanying table,we can see that the demand curve for ice skates by hockey players will be ________ the demand curve for recreational skaters.

A)steeper than
B)flatter than
C)unrelated to
D)the same as
E)the inverse of

Question 47

Firms are indifferent to changing prices when the price elasticity of demand is:

A)inelastic.
B)perfectly elastic.
C)elastic.
D)unitary elastic.
E)perfectly inelastic.

Question 48

As you move left along the demand curve,the price elasticity of demand:

A)becomes more inelastic.
B)becomes more elastic.
C)does not change.
D)becomes infinite.
E)moves closer to zero.

Question 49

A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold.The revenue received by cookie suppliers will ________ because the price elasticity of demand for cookies is ________.

A)decrease; inelastic
B)increase; elastic
C)decrease; elastic
D)not change; unitary elastic
E)increase; inelastic

Question 50

While there are many pizza places in Curtisville,Pappy's Pizza is known for its distinctive deep-dish pizza with an almost pie-like crust,whereas Momma's Pizza Pizzazz is comparable to many other restaurants.Pappy's is likely to find that it can ________ prices to increase total revenue,and Mommas must ________ prices to increase total revenue.

A)raise; lower
B)lower; raise
C)raise; raise
D)lower; lower
E)raise; not change

Question 51

As you move right along a demand curve,the price elasticity of demand:

A)becomes more inelastic.
B)becomes more elastic.
C)does not change.
D)becomes infinite.
E)moves closer to zero.

Question 52

Refer to the accompanying table.The price elasticity of demand of erasers is __________ when the price is lowered from $1.50 to $1.00.Sellers of erasers will __________ their total revenue from this price change.

A)perfectly elastic; not change
B)elastic; raise
C)elastic; lower
D)inelastic; lower
E)inelastic; raise

Question 53

In the accompanying graph,the price elastic portion of demand is found in the ________ region and the price inelastic portion of demand is found in the ________ region of the graph.

A)middle; lower
B)lower; upper
C)upper; lower
D)middle; middle
E)None of these choices are correct.

Question 54

For which of the following products should sellers raise the price in order to increase total revenue from college students?

A)blue hooded sweatshirts
B)Gatorade
C)concert tickets
D)textbooks
E)spaghetti sauce

Question 55

Super Economy Brand products have an income elasticity of -1.4.Thus,these are __________ goods.

A)necessity
B)inferior
C)luxury
D)normal
E)complementary

Question 56

Pepsi vendors who raise their price at professional sporting events increase total revenue because the price elasticity of demand is ________.When they raise their prices at gas stations,they decrease total revenue because the price elasticity of demand is ________.

A)elastic; inelastic
B)unitary elastic; elastic
C)elastic; elastic
D)inelastic; elastic
E)elastic; unitary elastic

Question 57

A local merchant raises the price of his good and finds that his total revenues increase.The demand for this good is:

A)inelastic.
B)elastic.
C)relatively price sensitive.
D)perfectly elastic.
E)unitary elastic.

Question 58

When the price of softballs is high,a __________ in price will raise total revenue.When the price is low,the seller should __________ the price to increase total revenue.

A)decrease; raise
B)rise; raise
C)decrease; decrease
D)rise; decrease
E)decrease; not change

Question 59

Winged Wonders is a specialty store that sells butterfly ornaments.The owner wants to increase her total revenue and knows that the price elasticity of demand for her product is -0.4.What should she do to her price?

A)Lower it by a relatively large amount.
B)Leave it unchanged and use another way to increase sales.
C)Decrease it to zero.
D)Raise it by any amount.
E)Lower it by a relatively small amount.

Question 60

When Nina decreases her price of lipstick from $7 to $5,she finds that her sales increase from 6 to 7.She faces ________ demand for her product,and this price change will ________ her total revenue.

A)elastic; raise
B)inelastic; lower
C)unitary elastic; not change
D)perfectly elastic; raise
E)perfectly inelastic; lower

Question 61

If the income elasticity of demand is -3,the good will be a(n):

A)complement good.
B)substitute good.
C)necessity good.
D)inferior good.
E)luxury good.

Question 62

If the income elasticity of demand for noodles is -2 and the percentage change in the quantity consumed is 5%,what is the percentage change in income?

A)2.5%
B)10%
C)-2.5%
D)-10%
E)-0.4%

Question 63

Refer to the information in the accompanying table.Without any calculations,you know that sushi is a(n):

A)necessity.
B)substitute for fish sticks.
C)normal good.
D)inferior good.
E)complement to sake.

Question 64

The income elasticity of demand for a good measures the responsiveness of ________ to a change in ________.

A)quantity demanded; price of a related good
B)quantity demanded; income
C)demand; price of good
D)quantity demanded; price of a good
E)income; quantity demanded

Question 65

Used car dealers find that their sales rise in a recession.We can be certain that consumers view used cars as:

A)necessities.
B)normal goods.
C)luxuries.
D)substitutes.
E)inferior.

Question 66

When incomes fall by 20%,quantity demanded of specialty baked goods falls by 50%.Specialty baked goods are:

A)inferior goods.
B)necessities.
C)substitutes for mass-produced bread.
D)luxuries.
E)complements to butter.

Question 67

If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%,what is the income elasticity of demand for pizza?

A)-0.25
B)4
C)0.25
D)-4
E)-1

Question 68

You are given a list of income elasticity of demand values.Which one represents a necessity?

A)-5
B)-0.5
C)0
D)5
E)0.5

Question 69

Shawna wins the lottery and her income increases by 60%.She used to buy 10 pints of cottage cheese per month and now she buys 12 pints.Her income elasticity of demand for cottage cheese is ________,making it a(n)________ good.

A)3; luxury
B)3.59; normal
C)0.33; necessity
D)0.28; inferior
E)-0.33; inferior

Question 70

A firm knows that Mike's income elasticity of demand for hair ties is 5 while for Sally it is 0.2.A firm can reason that a hair tie is a(n)________ good for Mike while it is a(n)________ good for Sally.

A)normal; inferior
B)complement; substitute
C)necessity; luxury
D)inferior; normal
E)luxury; necessity

Question 71

When Clayton starts working at his first full-time job out of college with a $60,000 salary,he is likely to buy more ________ and less ________.

A)sushi; canned tuna
B)ramen noodles; steak
C)BMWs; Kias
D)computer hardware; computer software
E)hamburger; salmon

Question 72

Howard buys 5 suits a year when he earns $70,000.When his income increases to $200,000,he buys 15 suits a year.From the midpoint method,his income elasticity of demand for suits is:

A)1.04
B)0.96
C)-1.04
D)-0.96
E)0.08

Question 73

If the income elasticity of demand is 0.5,the good will be a(n):

A)complement good.
B)substitute good.
C)necessity good.
D)inferior good.
E)luxury good.

Question 74

Income elasticity of demand for professional haircuts is found to be 1.7.This service is a:

A)normal good and necessity good.
B)luxury good but not a normal good.
C)necessity good but not a normal good.
D)substitute good.
E)normal good and a luxury good.

Question 75

When Sue received a promotion at work,her income rose by 50%.The income elasticity of demand for steak was found to be 1.5.For her,steak is a(n):

A)inferior good.
B)necessity.
C)complement to potatoes.
D)substitute for chicken.
E)luxury.

Question 76

If the income elasticity of demand is 1.2,the good will be a(n):

A)complement good.
B)substitute good.
C)necessity good.
D)inferior good.
E)luxury good.

Question 77

When her income falls from $50,000 to $20,000,Alex increases her monthly purchase of hamburger from 20 pounds to 35 pounds.From the midpoint method,Alex's income elasticity of demand for hamburgers is:

A)-1.57.
B)-0.63.
C)0.54.
D)-0.85.
E)1.57.

Question 78

What good is most likely to have a negative income elasticity of demand?

A)steak
B)caviar
C)designer clothing
D)pizza
E)instant noodles

Question 79

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10%,what is the percentage change in the quantity consumed?

A)-0.5%
B)-5%
C)50%
D)0.5%
E)2%

Question 80

If the income elasticity of demand for laptops is 3.5,you know that laptops are a(n):

A)substitute good.
B)inferior good.
C)luxury good.
D)necessity good.
E)complement good.