Deck 4: Elasticity

Question 1

Consider the following data for a hypothetical economy. $$\begin{array}{l}\begin{array} { | l | l | l | l | l | l | } \hline \text { Year } & \begin{array} { l } \text { Average } \\\text { Household } \\\text { Income } ( \$ )\end{array} & \begin{array} { l } \text { Price of } \\\text { Transit Passes }\end{array} & \begin{array} { l } \text { Qty } \\\text { Demanded of } \\\text { Transit Passes }\end{array} & \begin{array} { l } \text { Price of } \\\text { Gasoline } \\\text { (\$/litre) }\end{array} & \begin{array} { l } \text { Qty Demanded } \\\text { of Gasoline } \\\text { (millions of litres) }\end{array} \\\hline 2009 & 80000 & 60 & 99000 & 0.95 & 1940 \\\hline 2010 & 80000 & 60 & 101000 & 1.05 & 2060 \\\hline\end{array}\\\text { TABLE } 4-5\end{array}$$

-Refer to Table 4- 5. The cross- price elasticity of demand for transit passes in terms of the price of gasoline is . A rise in the price of gasoline causes the demand curve for transit passes to shift to the _.

A) 0.2; right
B) 0.2; left
C) 5.0; right
D) 0.33; left
E) 0.33; right

Answer 1

0.2; right

Question 2

An upward- sloping straight- line supply curve through the origin has an elasticity of

A) zero.
B) infinity.
C) greater than one.
D) less than one.
E) one.

Answer 2

E

Question 3

Suppose you are shown two intersecting demand curves that are drawn on the same scale. At the point of intersection, one of the demand curves is steeper than the other. Which of the following could explain the difference in slopes?

A) It is not possible to compare the slopes of different demand curves.
B) The flatter one is for a good with no close substitutes.
C) The steeper one has a higher income elasticity of demand.
D) The steeper one applies for the short run whereas the flatter one applies for the long run.
E) The steeper one is probably the demand curve for a luxury good.

Answer 3

D

Question 4

FIGURE 4- 2
Refer to Figure 4- 2. The price elasticity of demand is constant as price changes in part(s)

A) 1.
B) 2.
C) 1, 2, and 3.
D) 2, 3, and 4.
E) none of the above

Question 5

If demand is unit elastic at all prices, then the demand curve is

A) a straight line.
B) perfectly horizontal.
C) a rectangular hyperbola.
D) a parabola.
E) upward sloping.

Question 6

$\text { Demand Schedule for Ski Tickets }$
$\begin{array}{|l|l|}\hline \text { Price (\$) } & \begin{array}{l}\text { Quantity } \\\text { Demanded (no. of } \\\text { tickets) }\end{array} \\\hline 120 & 0 \\\hline 110 & 100 \\\hline 100 & 200 \\\hline 90 & 300 \\\hline 80 & 400 \\\hline 70 & 500 \\\hline 60 & 600 \\\hline 50 & 700 \\\hline 40 & 800 \\\hline 30 & 900 \\\hline 20 & 1000 \\\hline 10 & 1100 \\\hline 0 & 1200 \\\hline\end{array}$
$\text { TABLE 4-2 }$

-Refer to Table 4- 2. Using the data provided to plot the demand curve for ski tickets results in a
Demand curve. Price elasticity along this demand curve is therefore _ as price is falling.

A) rectangular hyperbola; constant at a value of 1
B) horizontal; constant at a value of 8
C) downward sloping and linear; continuously decreasing
D) vertical; constant at a value of 0
E) downward sloping and linear; continuously increasing

Question 7

If the total expenditure on clothing decreases when the price of clothing falls, the price elasticity of demand is

A) greater than one (demand is elastic).
B) not determinable from the information given.
C) less than one (demand is inelastic).
D) unity (demand is unit elastic).
E) exactly zero.

Question 8

We can expect that the income elasticity of demand for gourmet catered meals would be the income elasticity of demand for meals from a fast- food restaurant.

A) less than
B) equivalent to
C) higher than
D) not comparable to
E) lower than

Question 9

Given that elasticity of supply changes over time, in the short run an increase in demand will generally cause

A) the quantity exchanged to rise above its long- run equilibrium value.
B) the price to rise to a level below its long- run equilibrium value.
C) the price to rise above its long- run equilibrium value.
D) both price and quantity exchanged to rise above their long- run equilibrium values.
E) supply to change.

Question 10

A perfectly horizontal demand curve shows that the own- price elasticity of demand is

A) unity.
B) less than one.
C) zero.
D) not defined.
E) infinite.

Question 11

When the percentage change in quantity demanded resulting from a price change is less than the percentage change in price, demand is said to be

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

Question 12

If firms' costs rise rapidly as output increases, the

A) supply curve will tend to be flat.
B) demand curve will tend to be steep.
C) price elasticity of supply will tend to be low.
D) price elasticity of supply will tend to be high.
E) elasticity of demand will tend to be low.

Question 13

The formula for income elasticity of demand may be written as which of the following?

A) change in quantity demanded change in income
B) percentage change in income percentage change in quantity demanded
C) percentage change in quantity demanded percentage change in income
D) change in income change in quantity demanded
E) percentage change in quantity demanded percentage change in price

Question 14

An increase in income will

A) always increase the demand for turnips.
B) increase the demand for turnips if turnips are inferior goods.
C) increase the supply of turnips.
D) increase the demand for turnips if turnips are normal goods.
E) decrease the demand for turnips if turnips have a very low price.

Question 15

Suppose you are advising the government on changes in the gasoline market. The current price is
$1.00 per litre and the quantity demanded is 2.5 million litres per day. Long- run price elasticity of demand is constant at 0.8. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

A) 32 percent, and total expenditure will rise.
B) 50 percent, and total expenditure will rise.
C) 15 percent, and total expenditure will fall.
D) 15 percent, and total expenditure will rise.
E) 12 percent, and total expenditure will fall.

Question 16

Suppose the cross- elasticity of demand between two goods, X and Y, is negative. If the price of X decreases, the quantity demanded will

A) not change.
B) fall for both goods.
C) fall for X and rise for Y.
D) rise for both goods.
E) rise for X and fall for Y.

Question 17

Suppose the cross- elasticity of demand for two goods, X and Y, is positive. If the price of Y falls, then quantity demanded will

A) rise for X and fall for Y.
B) fall for X and rise for Y.
C) fall for both goods.
D) remain the same for both goods.
E) rise for both goods.

Question 18

Income elasticity measures the change in quantity demanded of some product with respect to changes in

A) its price.
B) the demand of the product.
C) the price of another related product.
D) households' income.
E) the supply of the product.

Question 19

If the price elasticity of demand for some good is 2.7, a 10 percent increase in the price results in

A) a 27 percent increase in the quantity demanded.
B) There is not enough information to answer this question.
C) a 2.7 percent increase in the quantity demanded.
D) a 2.7 percent decrease in the quantity demanded.
E) a 27 percent decrease in the quantity demanded.

Question 20

Income elasticity of demand measures the extent to which

A) one household's income changes when there is a change in the income of another household.
B) the quantity demanded of a good changes when income changes.
C) the price of a good changes when there is a change in income.
D) quantity demanded changes when there is a change in price.
E) real household income changes when there is a change in the price of a good.

Question 21

FIGURE 4- 1
Refer to Figure 4- 1, which shows two demand curves, one linear and the other a rectangular hyperbola. The price elasticity of demand is equal to one along the entire demand curve in

A) diagram 2 only.
B) diagram 1 only.
C) both diagrams.
D) neither diagram.

Question 22

$\text { Demand Schedule for Ski Tickets }$
$\begin{array}{|l|l|}\hline \text { Price (\$) } & \begin{array}{l}\text { Quantity } \\\text { Demanded (no. of } \\\text { tickets) }\end{array} \\\hline 120 & 0 \\\hline 110 & 100 \\\hline 100 & 200 \\\hline 90 & 300 \\\hline 80 & 400 \\\hline 70 & 500 \\\hline 60 & 600 \\\hline 50 & 700 \\\hline 40 & 800 \\\hline 30 & 900 \\\hline 20 & 1000 \\\hline 10 & 1100 \\\hline 0 & 1200 \\\hline\end{array}$
$\text { TABLE 4-2 }$

-Refer to Table 4- 2. The price elasticity of demand over the interval of the demand curve between prices of $40 and $20 is

A) 1.0
B) - 0.33
C) - 3.0
D) 3.0
E) 0.33

Question 23

$\text { Demand Schedule for Ski Tickets }$
$\begin{array}{|l|l|}\hline \text { Price (\$) } & \begin{array}{l}\text { Quantity } \\\text { Demanded (no. of } \\\text { tickets) }\end{array} \\\hline 120 & 0 \\\hline 110 & 100 \\\hline 100 & 200 \\\hline 90 & 300 \\\hline 80 & 400 \\\hline 70 & 500 \\\hline 60 & 600 \\\hline 50 & 700 \\\hline 40 & 800 \\\hline 30 & 900 \\\hline 20 & 1000 \\\hline 10 & 1100 \\\hline 0 & 1200 \\\hline\end{array}$
$\text { TABLE 4-2 }$

-Refer to Table 4- 2. Total expenditure for ski tickets reaches a maximum at a price/quantity demanded combination of

A) $80/400
B) $100/200
C) $30/90
D) $20/1000
E) $60/600

Question 24

FIGURE 4- 2
Refer to Figure 4- 2. In part 1 of the figure, the elasticity of demand over the price range $14 to $16 is

A) 0.
B) less than 1.
C) 1.
D) greater than 1.
E) infinity.

Question 25

If the price elasticity of demand is 0.5, then a 10 percent increase in price results in a

A) 5 percent decrease in quantity demanded.
B) 50 percent reduction in quantity demanded.
C) 5 percent increase in quantity demanded.
D) 0.5 percent decrease in quantity demanded.
E) 5 percent decrease in total revenues.

Question 26

If pizza and beer are complementary goods, we can conclude that

A) the income elasticity of demand is negative.
B) their cross- elasticity of demand is negative.
C) the income elasticity of demand is positive.
D) both goods are inferior goods.
E) their cross- elasticity of demand is positive.

Question 27

Producers will bear a larger burden of a sales tax if

A) demand is relatively elastic and supply is relatively inelastic.
B) demand is relatively inelastic and supply is relatively elastic.
C) both demand and supply are relatively elastic.
D) both demand and supply are relatively inelastic.
E) the tax is collected by firms rather than remitted directly to the government by consumers.

Question 28

Suppose you are advising the government on changes in the gasoline market. The current price is
$1.00 per litre and the quantity demanded is 2.5 million litres per day. Short- run price elasticity of demand is constant at 0.3. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the short run by

A) 13.3 percent, and total expenditure will rise.
B) 50 percent , and total expenditure will fall.
C) 15 percent, and total expenditure will fall.
D) 12 percent, and total expenditure will rise.
E) 15 percent, and total expenditure will rise.

Question 29

FIGURE 4- 2
Refer to Figure 4- 2. As price decreases, total expenditure increases, reaches a maximum, and then decreases for the demand curve in diagram(s)

A) 1.
B) 2.
C) 3.
D) 4.
E) 1 and 3.

Question 30

The "economic incidence" of an excise tax illustrates

A) who is legally responsible for paying it to the government.
B) who bears the burden of the tax.
C) the legislative process it must pass through.
D) the political process for implementing a tax.
E) the economic costs of avoiding it.

Question 31

If a product's income elasticity is - 3.4, then we can conclude that

A) an increase in income will lead to an increase in demand for the product.
B) the product is a normal good.
C) the product is certainly a necessity.
D) the product has a rising income- consumption curve.
E) a decrease in income will lead to an increase in demand for the product.

Question 32

If two goods, X and Y, have a negative cross- elasticity of demand, then we know that they

A) each have a price elasticity greater than one.
B) are both normal goods.
C) are substitutes.
D) are complements.
E) are both inferior goods.

Question 33

If household expenditures on electricity remain constant when the price of electricity increases, the price elasticity for electricity is

A) one (demand is unit elastic).
B) exactly zero.
C) not determinable from the information given.
D) less than one (demand is inelastic).
E) greater than one (demand is elastic).

Question 34

FIGURE 4- 3
Refer to Figure 4- 3, which shows a demand shift and the short- run and long- run supply curves for some product. In the new long- run equilibrium at EL, producers' revenue

A) could be higher or lower than at ES, depending on the price elasticity of demand.
B) could be higher or lower than at E0, depending on the price elasticity of demand.
C) is unambiguously higher than at ES.
D) is unambiguously lower than at ES.
E) is unambiguously lower than at E0.

Question 35

The elasticity of supply for some product will tend to be larger

A) the less time firms have to adjust to price changes.
B) the easier it is for firms to shift from the production of this product to another.
C) the lower is the elasticity of demand for the product.
D) the higher is the elasticity of demand for the product.
E) the harder it is for firms to shift from the production of this product to another.

Question 36

Suppose national income is rising steadily at 2 percent per year over a 5- year period. Over the same time period, suppose quantity demanded for iPods and iPhones increases at 5 percent per year, but no other relevant variables are changing. We can conclude that the income elasticity for these products is and that these products are goods.

A) 0.4; inferior
B) 2.5; luxury
C) 10.0; necessities
D) 4.0; necessities
E) 4.0; normal

Question 37

If two goods, X and Y, have a positive cross- elasticity of demand, then we know that they

A) each have a price elasticity greater than one.
B) are complements.
C) are substitutes.
D) are both inferior goods.
E) are both normal goods.

Question 38

If the price elasticity of demand is 1.4, a 10 percent increase in the price of the good results in

A) a 14 percent increase in the quantity demanded.
B) a 1.4 percent increase in the quantity demanded.
C) a 1.4 percent decrease in the quantity demanded.
D) a 14 percent decrease in the quantity demanded.
E) There is not enough information to answer this question.

Question 39

An inferior good has

A) a positive income elasticity of demand.
B) a positive income elasticity of demand and a price elasticity of demand greater than 1.
C) an income elasticity of demand greater than zero but less than 1.
D) a negative income elasticity of demand.
E) a negative price elasticity of demand.

Question 40

Cross- price elasticity of demand may be defined as

A) $\frac{\text {percentage change in quantity demanded of good \( x \) }}{\text {percentage change in income }}$
B) $\frac{\text {percentage change inquantity demanded of good \( x \) }}{\text {percentage change in price of good \( Y \) }}$
C) $\frac{\text {percentage change in price of good \( x \) }}{\text {percentage change in price of good \( Y \) }}$
D) $\frac{\text {percentage change in quantity demanded of good \( x \) }}{\text { percentage change in price of good \( x \)}}$
E) $\frac{\text {percentage change in price of good \( Y \) }}{\text {percentage change in quantity demanded of good \( x \) }}$

Question 41

The elasticity of supply for a given commodity is calculated as

A) $\frac{\text { perentage change inquantity supplied}}{\text { percentage change in average household income}}$
B) $\frac{\text { percentage change in quantity gupplied of one good }}{\text { percentage change in average price of a different good}}$
C) $\frac{\text {percentage change in quantity supplied }}{\text { perentage change in product price}}$
D) $\frac{\text { percent change in product rice}}{\text { percentage change in quantity supplied}}$
E) $\frac{\text {percentage change in quantity supplied }}{\text {percentage change in inputprices }}$

Question 42

A vertical demand curve shows that the own- price elasticity of demand is

A) less than one.
B) unity.
C) zero.
D) not defined.
E) infinity.

Question 43

If per capita income increases by 10 percent and household expenditure on fur coats increases by 15 percent, one can conclude that the price elasticity of demand for fur coats is

A) elastic.
B) not determinable from the information given.
C) unity.
D) inelastic.
E) positive.

Question 44

When the percentage change in quantity demanded is less than the percentage change in price that brought it about, demand is said to be

A) unit elastic.
B) zero elastic.
C) unelastic.
D) inelastic.
E) elastic.

Question 45

The formula for the own- price elasticity of demand for a commodity can be written as which of the following?

A) $\frac{\text {change in quantity demanded }}{\text { change in price}}$
B) $\frac{\text {perentage changeinprice }}{\text {percentage change inquantity demanded }}$
C) $\frac{\text {change in price }}{\text {change in quantity demanded }}$
D) $\frac{\text {perentage change in quantity demanded}}{\text { percentage change in price }}$
E) $\frac{\text {percentage change in one price }}{\text { percentage change in the other price}}$

Question 46

A demand curve for which any price- quantity combination yields the same total expenditure reveals a price elasticity of demand equal to

A) not enough information to know.
B) infinity.
C) zero.
D) some value greater than one but less than infinity.
E) one.

Question 47

FIGURE 4- 2
Refer to Figure 4- 2. There is good reason to suppose that, of the four goods whose demand curves are shown in parts 1- 4 of the figure, the good that has the fewest close substitutes is shown in

A) part 1.
B) part 2.
C) part 3.
D) part 4.
E) -- there is not enough information to even make a good guess.

Question 48

If the total expenditure on perfume increases when the price of perfume falls, the price elasticity of demand is

A) unity (demand is unit elastic).
B) exactly zero.
C) not determinable from the information given.
D) greater than one (demand is elastic).
E) less than one (demand is inelastic).

Question 49

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%, then her income elasticity of demand for music downloads is

A) 2.0.
B) - 0.5.
C) - 2.0.
D) 4.0.
E) 0.5.

Question 50

Which of the following tends to be true of the income elasticity of demand for food?

A) At low levels of income, it tends to be fairly high; but as the level of income rises, it tends to fall.
B) It tends to be well above unity only at high levels of income.
C) It is usually zero, since we can only eat so much.
D) It tends to be well below unity only at low levels of income.
E) It tends to remain fairly constant at all levels of income.

Question 51

Which of the following illustrates elastic demand?

A) a price elasticity of 1.0.
B) A 5 percent increase in price causes a 10 percent decrease in quantity demanded.
C) A 5 percent increase in price causes a 2.5 percent decrease in quantity demanded.
D) A 10 percent increase in price causes a 10 percent reduction in quantity demanded.
E) a price elasticity of 0.8.

Question 52

FIGURE 4- 1
Refer to Figure 4- 1, which shows two demand curves, one linear and the other a rectangular hyperbola. In diagram 1, the price elasticity of demand

A) at point A is equal to that at point C.
B) is equal at points A, B, and C.
C) at point A is greater than at point C.
D) at point A is less than at point C.
E) at point A is equal to that at point B.

Question 53

Which of the following illustrates elastic demand?

A) A 10 percent increase in price causes a 5 percent decrease in quantity demanded.
B) A 10 percent increase in price causes a 10 percent reduction in quantity demanded.
C) A 10 percent increase in price causes a 20 percent decrease in quantity demanded.
D) a price elasticity of 0.8
E) a price elasticity of 1.0

Question 54

Which of the following statements would you expect to be true about price elasticities of demand for T- shirts and clothing?

A) Clothing has a higher price elasticity of demand because it is a necessity.
B) Clothing has a lower price elasticity of demand because it is more broadly defined.
C) Compared with clothing, T- shirts have a lower price elasticity of demand because they are specifically defined.
D) T- shirts would have the same price elasticity of demand as clothing.
E) Because T- shirts are clothing, but not all clothing is T- shirts, T- shirts would have a lower price elasticity of demand than clothing.

Question 55

When a product's price has an inverse relationship with total expenditure, then demand has a price elasticity of

A) greater than one.
B) inverse proportions.
C) one.
D) zero.
E) less than one.

Question 56

Nancy's income has just risen from $950 per week to $1,050 per week. As a result, she decides to double the number of movies she attends each week. Nancy's demand for movies is

A) income elastic.
B) positively cross inelastic.
C) price elastic.
D) income inelastic.
E) price inelastic.

Question 57

A demand curve that is the shape of a rectangular hyperbola

A) is inelastic over the whole curve.
B) has the same elasticity as a straight- line demand curve.
C) is elastic over the whole curve.
D) has an elasticity of 100 percent over the whole curve.
E) is unit elastic over the whole curve.

Question 58

During the 1970s, OPEC's output restrictions caused gasoline prices to increase sharply. Coincidentally, demand for gas- guzzling cars fell. A likely explanation for these observations is that gasoline and cars had a elasticity of demand that was .

A) cross; negative
B) income; positive
C) price; negative
D) cross; positive
E) income; negative

Question 59

For an inferior good, the quantity demanded

A) responds directly to changes in income.
B) rises when income rises.
C) falls when income falls.
D) rises when income falls.
E) does not change when income rises or falls.

Question 60

If the total expenditure on photocopiers increases when the price of photocopiers rises, the price elasticity of demand is

A) not determinable from the information given.
B) less than one (demand is inelastic).
C) greater than one (demand is elastic).
D) exactly zero.
E) equal to one (demand is unit elastic).

Question 61

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

A) Compared with food, cornflakes has a lower price elasticity of demand because it is specifically defined.
B) Food has a lower price elasticity of demand than cornflakes because it is more broadly defined.
C) Food has a higher price elasticity of demand because it is a necessity.
D) Because cornflakes is food, cornflakes would have the same price elasticity of demand as food.
E) Because cornflakes is food, but not all food is cornflakes, cornflakes would have a lower price elasticity of demand.

Question 62

Suppose a market is in equilibrium at price P0, and then an excise tax of t dollars per unit of the good is imposed. At a price of (P0 + t) there will be excess for the good unless the demand curve is .

A) supply; vertical
B) demand; horizontal
C) demand; vertical
D) tax; unit elastic
E) supply; horizontal

Question 63

The president of a major nickel- producing company says that an increase in the price of nickel would have no effect on the total amount spent on nickel. If this is true, the price elasticity of demand for nickel is

A) not calculable from the information given.
B) infinitely elastic.
C) more than one.
D) less than zero.
E) exactly one.

Question 64

Consumers will bear a larger burden of an excise tax if

A) demand is relatively elastic and supply is relatively inelastic.
B) the tax is collected by firms rather than remitted directly to the government by consumers.
C) both demand and supply are relatively elastic.
D) both demand and supply are relatively inelastic.
E) demand is relatively inelastic and supply is relatively elastic.

Question 65

If the income elasticity of demand for a good is 1.25, a 10 percent increase in income results in

A) a 12.5 percent decrease in the quantity demanded.
B) a 125 percent increase in the quantity demanded.
C) a 12.5 percent increase in the quantity demanded.
D) a decrease in quantity demanded.
E) not enough information to answer this question.

Question 66

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

A) 1.0
B) 4.0
C) 0.5
D) 2.0
E) 1.5

Question 67

FIGURE 4- 2
Refer to Figure 4- 2. In part 3 of the figure, the elasticity of demand between prices $5 and $10 is

A) 0.
B) less than 1.
C) exactly 1.
D) greater than 1.
E) infinity.

Question 68

Normal goods

A) have positive income elasticity of demand.
B) have negative income elasticity of demand.
C) have negative elasticity of supply.
D) are sometimes also inferior goods.
E) do not have elasticity of demand.

Question 69

For which of the following pairs of products would we expect the cross- elasticity of demand to be negative?

A) aceteminophen and ibuprofen
B) butter and margarine
C) iPhones and Blackberries
D) printers and toner cartridges
E) HD TVs and plasma TVs

Question 70

With a downward- sloping straight- line demand curve, price elasticity of demand is

A) indeterminate.
B) decreasing continuously with price increases.
C) rising continuously with price increases.
D) constant everywhere on it.
E) increasing to the midpoint of the curve and then decreasing.

Question 71

If the total expenditure on automobiles increases when the price of automobiles rises, the price elasticity of demand for automobiles is

A) less than one (demand is inelastic).
B) not determinable from the information given.
C) greater than one (demand is elastic).
D) exactly zero.
E) equal to one (demand is unit elastic).

Question 72

Refer to Figure 4- 2. The price elasticity of demand is continuously decreasing as the price falls in part(s)

A) 1.
B) 2.
C) 1, 2, and 3.
D) 2, 3, and 4.
E) 1 and 2.

Question 73

Consider the following data for a hypothetical economy. $\begin{array}{|l|l|l|l|l|l|}\hline \text { Year } &\begin{array}{l}\text { Average } \\\text { Household } \\\text { Income }(\$)\end{array} & \begin{array}{l}\text { Price of Transit } \\\text { Passes }\end{array} & \begin{array}{l}\text { Qty } \\\text { Demanded of } \\\text { TransitPasses }\end{array} & \begin{array}{l}\text { Price of } \\\text { Gasoline } \\\text { (\$litre) }\end{array} & \begin{array}{l}\text { Qty Demanded } \\\text { of G asoline } \\\text { (millions of litres) }\end{array} \\\hline 2009 & 80000 & 60 & 99000 & 0.95 & 1940 \\\hline 2010 & 80000 & 60 & 101000 & 1.05 & 2060 \\\hline\end{array}$ TABLE 4- 5

-Refer to Table 4- 5. The cross- price elasticity of demand for transit passes in terms of the price of gasoline is _. We can therefore conclude that these two goods are .

A) 0.5; substitutes
B) 0.33; substitutes
C) 0.2; substitutes
D) 5.0; complements
E) 0.2; complements

Question 74

$$\begin{array}{l}\text { Demand Schedule for Ski Tickets }\\\begin{array} { | l | l | } \hline \text { Price } ( \$ ) & \begin{array} { l } \text { Quantity } \\\text { Demanded } ( \text { no. of } \\\text { tickets } )\end{array} \\\hline 120 & 0 \\\hline 110 & 100 \\\hline 100 & 200 \\\hline 90 & 300 \\\hline 80 & 400 \\\hline 70 & 500 \\\hline 60 & 600 \\\hline 50 & 700 \\\hline 40 & 800 \\\hline 30 & 900 \\\hline 20 & 1000 \\\hline 10 & 1100 \\\hline 0 & 1200 \\\hline\end{array}\end{array}$$ TABLE 4- 2

-Refer to Table 4- 2. Price elasticity over the interval of the demand curve between prices of $90 and
$70 is

A) 0.5
B) - 0.5
C) 2.0
D) - 2.0
E) 1.0

Question 75

If household income increases by 50 percent and desired household expenditure on vacation travel increases by 15 percent, the price elasticity of demand for vacation travel is

A) elastic.
B) inelastic.
C) positive.
D) unity.
E) not determinable from the information given.

Question 76

FIGURE 4- 2
Refer to Figure 4- 2. In part 3 of the figure, the elasticity of demand between prices $10 and $20 is

A) 0.
B) less than 1.
C) exactly 1.
D) greater than 1.
E) infinity.

Question 77

Suppose the market supply curve for some good is upward sloping. If the imposition of an excise tax causes no change in the equilibrium quantity sold in the market, the good's demand curve must be , meaning that the burden of the tax has fallen completely on the .

A) unit elastic; government
B) vertical; firms
C) horizontal; consumers
D) horizontal; firms
E) vertical; consumers

Question 78

When national income falls, sales of vacation packages also fall, even at constant prices. This fact suggests that the _ _ elasticity of demand for vacation packages is .

A) cross; positive
B) income; positive
C) income; negative
D) price; negative
E) price; positive

Question 79

A value of infinity for the elasticity of supply of some product implies that

A) no product will be supplied at any price.
B) the supply curve is vertical.
C) supply is very unresponsive to price.
D) the supply curve is horizontal.
E) the product will be supplied at any price.

Question 80

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit. The price elasticity of demand for this product is

A) 2.
B) 2/3.
C) 1/3.
D) 3/2.
E) 1.