Deck 6: Describing Supply and Demand: Elasticities

Question 1

Demand is said to be elastic when the:

A) percentage change in quantity demanded is less than the percentage change in price.
B) percentage change in quantity demanded is greater than the percentage change in price.
C) change in quantity demanded is less than the change in price.
D) change in quantity demanded is greater than the change in price.

Answer 1

B

Question 2

If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about:

A) 0.0.
B) 0.4.
C) 0.6.
D) 2.5.

Answer 2

B

Question 3

Revenue remains unchanged along a straight-line demand curve.

Answer 3

False

Question 4

Refer to the following graph. If price is currently at B and rises, total revenue will rise.

Question 5

If demand is highly inelastic and supply shifts to the right, the equilibrium price will rise significantly while quantity will increase only slightly.

Question 6

The cross-price elasticity of demand is the percentage change in price divided by the percentage change in the price of another good.

Question 7

When the demand curve is highly inelastic, there is a strong incentive for suppliers to find a way to collectively reduce the quantity sold in the market and raise the price of the product.

Question 8

If the price of a good goes up by 20 percent and the quantity demanded falls by 40 percent, the price elasticity of demand is 2.

Question 9

Price elasticity of demand is the percentage change in price divided by the percentage change in quantity demanded.

Question 10

If the amount of land supplied remains the same even when the price of land increases, the:

A) supply of land must be perfectly elastic.
B) supply of land must be perfectly inelastic.
C) demand for land must be perfectly elastic.
D) demand for land must be perfectly inelastic.

Question 11

The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism causes the supply of gasoline to fall, resulting in a 5 percent drop in quantity, and other things remain the same, the price per gallon will increase by:

A) 4 percent.
B) 5 percent.
C) 20 percent.
D) 25 percent.

Question 12

If the price of corn goes up by $1 a bushel and the quantity supplied rises by 100 bushels, the price elasticity of supply has to be 100.

Question 13

The price elasticity of supply is the:

A) change in the quantity supplied divided by the change in price.
B) percentage change in the quantity supplied divided by the percentage change in price.
C) change in the price divided by the change in the quantity supplied.
D) percentage change in the price divided by the percentage change in the quantity supplied.

Question 14

Refer to the following graph. Since the supply curve intersects the horizontal axis, all the points along the supply curve shown are inelastic.

Question 15

In general, the greater the elasticity, the:

A) smaller the responsiveness of price to changes in quantity.
B) smaller the responsiveness of quantity to changes in price.
C) larger the responsiveness of price to changes in quantity.
D) larger the responsiveness of quantity to changes in price.

Question 16

Price elasticity of demand is the:

A) change in the quantity demanded of a good divided by the change in the price of that good.
B) change in the price of a good divided by the change in the quantity demanded of that good.
C) percentage change in price of that good divided by the percentage change in the quantity demanded of that good.
D) percentage change in quantity demanded of a good divided by the percentage change in the price of that good.

Question 17

When demand is perfectly inelastic, there is no change in quantity demanded after a change in price.

Question 18

Most likely, the elasticity of demand for transportation is greater than the elasticity of demand for cars.

Question 19

Supply is said to be inelastic when the:

A) percentage change in quantity supplied is less than the percentage change in price.
B) percentage change in quantity supplied is greater than the percentage change in price.
C) change in quantity supplied is less than the change in price.
D) change in quantity supplied is greater than the change in price.

Question 20

If quantity demanded falls by 25 percent when price rises by 50 percent, demand is said to be:

A) elastic.
B) inelastic.
C) proportional.
D) unit elastic.

Question 21

If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a:

A) 5 percent increase in quantity supplied.
B) 5 percent decrease in quantity supplied.
C) 20 percent increase in quantity supplied.
D) 20 percent decrease in quantity supplied.

Question 22

If the price of a good goes up by 5 percent and, in response, the quantity demanded falls by 15 percent, the price elasticity of demand will be:

A) )05.
B) 3.
C) 0.3333.
D) 0.15.

Question 23

As the price of tomatoes fell from $2.50 to $2.00, the quantity imported from Mexico fell from 1,800 tons to 900 tons. The elasticity of supply of tomatoes imported from Mexico is:

A) 0.25.
B) 0.3.
C) 3.0.
D) 5.

Question 24

Measuring the price of gasoline in dollars, an economist calculates the price elasticity of demand to be .5. What would the price elasticity of demand be if the economist had chosen to measure the price of gasoline in pennies rather than dollars?

A) )5
B) )05
C) )005
D) 50

Question 25

If a $100 drop in the price of a $10,000 car resulted in an increase in the quantity of cars purchased from 100 to 110 and a $100 drop in the price of a $1,000 vacation rental resulted in an increase in the quantity of weekly vacation homes rented from 100 to 110, the price elasticity of demand is:

A) greater for the car.
B) less for the car.
C) the same for both the car and the vacation rental.
D) not comparable.

Question 26

As the manager of a ski resort, you want to increase the number of lift tickets sold by 8 percent. Your staff economist has determined that the price elasticity of demand for lift tickets is 2. To increase sales by the desired amount, you should decrease the price of a lift ticket by:

A) 2 percent.
B) 4 percent.
C) 8 percent.
D) 16 percent.

Question 27

If the quantity of picture frames supplied increases 15 percent when the price goes up 20 percent, the elasticity of supply is:

A) 15.
B) 20.
C) 1.33.
D) 0.75.

Question 28

A marketing student observes that when the price of ice cream rises by 10 percent, the quantity of ice cream a supplier is willing to sell rises by 5 percent. The student correctly concludes that the elasticity of supply for ice cream is:

A) )2.
B) )5.
C) 2.
D) 5.

Question 29

It has been estimated that the price elasticity for cigarettes is 0.164. Assuming there are currently no taxes on cigarettes, to reduce cigarette purchases by 5 percent, the government would need to tax cigarettes enough to:

A) raise the price by 0.82 percent.
B) lower the price by 0.82 percent.
C) raise the price by 30.5 percent.
D) lower the price by 30.5 percent.

Question 30

Richard Voith estimated the price elasticity of demand for round-trip rail fare to be 0.62. If fares rose by 30 percent, one would expect the quantity of round-trip tickets purchased to:

A) rise by 18.6 percent.
B) fall by 18.6 percent.
C) rise by 48.4 percent.
D) fall by 48.4 percent.

Question 31

It has been estimated that the price elasticity of demand for attending baseball games is 0.23. Other things held constant, a 10 percent increase in attendance can be explained by a:

A) 43.48 percent fall in the price of a ticket.
B) 43.48 percent rise in the price of a ticket.
C) 23 percent fall in the price of a ticket.
D) 23 percent rise in the price of a ticket.

Question 32

Susan's price elasticity of restaurant meals is 2.27. If the price of a restaurant meal falls by 2 percent, the quantity of restaurant meals Susan demands will:

A) increase by 2.27 percent.
B) fall by 2.27 percent.
C) increase by 4.54 percent.
D) increase by 22.7 percent.

Question 33

Measuring the price of gasoline in dollars per quart, an economist calculates the price elasticity of demand to be 1. What would the price elasticity of demand be if the economist had chosen to measure the price in dollars per gallon?

A) 1
B) 4
C) )25
D) )5

Question 34

An elasticity of supply of 2.7 means that:

A) supply is inelastic.
B) quantity supplied changes 2.7 units for each 1 percent change in price.
C) quantity supplied changes 2.7 percent for each 1 percent change in price.
D) price changes by 2.7 percent for each 1 percent change in quantity supplied.

Question 35

As the price of beachfront cottages in Florida was raised from $400,000 to $500,000, their quantity supplied rose from 2,000 to 2,100. Rounding to the nearest tenth, the elasticity of supply of beachfront cottages is:

A) 0.4.
B) 0.2.
C) 1.0.
D) 4.6.

Question 36

A sporting goods store observes that as they reduce the price of squash balls from $5 to $4, their quantity demanded rises from 200 to 220. Rounding to the nearest tenth, they correctly compute the elasticity of demand of squash balls to be:

A) 0.1.
B) 0.4.
C) 2.3.
D) 5.

Question 37

A newspaper recently lowered its price from 50 cents to 30 cents, causing the number of newspapers sold to increase from 240,000 to 280,000. Other things equal, the data imply that the elasticity of demand for this newspaper is about:

A) 3.25.
B) 0.5.
C) 0.3.
D) 0.15.

Question 38

If average movie attendance is 250 million when prices are $9 a ticket and 200 million when prices are $11 a ticket, the elasticity of demand for movie tickets is about:

A) 0.0.
B) 0.9.
C) 1.1.
D) 1.8.

Question 39

Charlie will purchase 10 percent more cans of Coke if the price of a can of Coke falls by 5 percent. Charlie's price elasticity of demand for cans of Coke is:

A) 10.
B) 5.
C) 2.
D) 1/2.

Question 40

A price elasticity of demand for a good or service of 1.8 tells us that:

A) the price changes by $1.80 when quantity changes by 1 unit.
B) quantity demanded falls by 1.8 percent when price rises by 1 percent.
C) the price rises by 1.8 percent when quantity demanded falls by 1 percent.
D) quantity demanded falls by 1.8 units when price changes by $1.

Question 41

If the percentage increase in the quantity supplied is smaller than the percentage increase in the price, the supply:

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

Question 42

Refer to the graph shown. The approximate elasticity of segment AB is:

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

Question 43

If the supply of a product is inelastic, this implies that a specific percentage change in price leads to:

A) an equal percentage change in the quantity supplied.
B) a larger percentage change in the quantity supplied.
C) a smaller percentage change in the quantity supplied.
D) no percentage change in the quantity supplied.

Question 44

As the price of samosas (a triangular pastry in India) was raised from 2 to 3 rupees (Indian currency), their quantity demanded fell from 15,000 to 12,000. Rounding to the nearest tenth, the elasticity of demand of samosas is:

A) 4.
B) 0.6.
C) 1.8.
D) impossible to determine because we don't know the exchange rate of the rupee.

Question 45

Refer to the graph shown. Demand is inelastic on line segment:

A) AB.
B) BC.
C) CD.
D) The demand is not inelastic on any of these line segments.

Question 46

Refer to the graph shown. The elasticity of demand is closest to 1 on line segment:

A) AB.
B) BC.
C) CD.
D) The elasticity is not close to 1 on any of these line segments.

Question 47

If the elasticity of demand for restaurant meals is 2.27, the demand for restaurant meals is:

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

Question 48

Compute the approximate elasticity of supply from the following data:

A) )2.
B) )5.
C) 2.1.
D) 5.0.

Question 49

Refer to the graph shown. The approximate elasticity of segment AC is:

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

Question 50

If the percentage increase in the quantity supplied is greater than the percentage increase in the price, the supply:

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

Question 51

Refer to the graph shown. Calculate the approximate average elasticity of demand as the price falls from $18 to $0:

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

Question 52

Refer to the graph shown. The approximate elasticity of segment AD is:

A) 3/4.
B) 3.
C) 4/3.
D) 4.

Question 53

If the price elasticity of demand for a good is inelastic, a price change causes:

A) a zero change in quantity demanded.
B) an infinite change in quantity demanded.
C) a more than proportionate change in quantity demanded.
D) a less than proportionate change in quantity demanded.

Question 54

If the quantity of houses supplied in an area increases 10 percent when the price goes up 25 percent, the supply:

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

Question 55

If quantity demanded changes infinitely when the price changes, the demand:

A) is slightly elastic.
B) is inelastic.
C) is unit elastic.
D) is perfectly elastic.

Question 56

If quantity demanded does not change when the price changes, the demand:

A) is elastic.
B) is inelastic.
C) has unit elasticity.
D) is perfectly inelastic.

Question 57

Refer to the graph shown. Calculate the approximate elasticity of demand for the line segment BD:

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

Question 58

If the percentage increase in the quantity supplied equals the percentage increase in the price, the supply:

A) is elastic.
B) is inelastic.
C) has unit elasticity.
D) is perfectly elastic.

Question 59

Refer to the graph shown. Calculate the approximate elasticity of demand for the line segment CD:

A) 3.
B) 1/3.
C) 1/5.
D) 5.

Question 60

Compute the approximate elasticity of demand from the following data:

A) )87.
B) 1.15.
C) 1.5.
D) 5.0.

Question 61

Along a straight-line supply curve:

A) elasticity rises as price rises.
B) elasticity declines as price declines.
C) elasticity is equal to slope.
D) the change in elasticity depends on the supply curve in question.

Question 62

Refer to the table shown to answer the question. Between $2 and $2.20, demand is: $$\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 1.60 & 130 \\\hline \$ 1.80 & 120 \\\hline \$ 2.00 & 110 \\\hline \$ 2.20 & 100 \\\hline \$ 2.40 & 90 \\\hline \$ 2.60 & 80 \\\hline\end{array}$$

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

Question 63

Refer to the graph shown. At which point is elasticity 1?

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

Question 64

Refer to the table shown to answer the question. Between $2.20 and $2.40, demand is: $$\begin{array} { | c | c | } \hline \text { Price } & \text { Qu.ntity Demanded } \\\hline \$ 1.60 & 130 \\\hline \$ 1.80 & 120 \\\hline \$ 2.00 & 110 \\\hline \$ 2.20 & 100 \\\hline \$ 2.40 & 90 \\\hline \$ 2.60 & 80 \\\hline\end{array}$$

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

Question 65

Refer to the following graph. Elasticity is greatest at point:

A) A.
B) B.
C) C.
D) It is the same everywhere along this supply curve.

Question 66

Refer to the following table to answer the question. Demand is inelastic between: $$\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 6.00 & 18 \\\hline \$ 8.00 & 14 \\\hline \$ 10.00 & 10 \\\hline \$ 12.00 & 6 \\\hline \$ 14.00 & 2 \\\hline\end{array}$$

A) $6 and $8.
B) $8 and $10.
C) $10 and $12.
D) $12 and $14.

Question 67

Refer to the following graph. Elasticity is greatest at point:

A) A.
B) B.
C) C.
D) It is the same everywhere along this supply curve.

Question 68

Refer to the following graph. Elasticity is greatest at point:

A) A.
B) B.
C) C.
D) It is the same everywhere along this supply curve.

Question 69

Refer to the table shown to answer the question. Between $1.60 and $1.80, demand is: $$\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 1.60 & 130 \\\hline \$ 1.80 & 120 \\\hline \$ 2.00 & 110 \\\hline \$ 2.20 & 100 \\\hline \$ 2.40 & 90 \\\hline \$ 2.60 & 80 \\\hline\end{array}$$

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

Question 70

Refer to the following table to answer the question. Supply shown by the table is: $$\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 6.00 & \mathbf { 8 0 } \\\hline \$ 8.00 & 90 \\\hline \$ 10.00 & 100 \\\hline \$ 12.00 & 110 \\\hline \$ 14.00 & 120 \\\hline\end{array}$$

A) elastic.
B) unit elastic.
C) inelastic.
D) changing as price changes.

Question 71

Elizabeth Savoca estimated that for every 1 percent increase in tuition costs at a college, 2.4 percent fewer students applied to that college. This indicates that the elasticity of applying to college is:

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

Question 72

George Davis and Michael Wohlgenant estimate that for every 1 percent increase in the price of Christmas trees, quantity demanded falls by 0.6 percent. The demand for Christmas trees is:

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

Question 73

Refer to the graph shown. Which of the following curves demonstrates a perfectly elastic demand curve?

A) A
B) B
C) C
D) None of the curves

Question 74

Refer to the graph shown. Which of the following curves demonstrates a perfectly inelastic demand curve?

A) A
B) B
C) C
D) None of the curves

Question 75

Refer to the following table to answer the question. Demand is most elastic between: $$\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 2.00 & 26 \\\hline \$ 4.00 & 22 \\\hline \$ 6.00 & 18 \\\hline \$ 8.00 & 14 \\\hline \$ 10.00 & 10 \\\hline\end{array}$$

A) $2 and $4.
B) $4 and $6.
C) $6 and $8.
D) $8 and $10.

Question 76

If consumers won't pay more than $1.50 for a pack of gum and at $1.50 they will buy an almost infinite amount, price elasticity of demand at $1.50 is:

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

Question 77

Along a straight-line demand curve, elasticity:

A) rises as price rises.
B) declines as price rises.
C) is equal to slope.
D) is always zero.

Question 78

If the elasticity of demand for electricity is 0.13, the demand for electricity is:

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

Question 79

Which of the following statements is true about a downward-sloping demand curve that is a straight line?

A) The slope and the elasticity are the same at all points.
B) The slope remains the same, but elasticity rises as you move down the demand curve.
C) The slope remains the same, but elasticity falls as you move down the demand curve.
D) The slope and the elasticity fall as you move down the demand curve.

Question 80

Refer to the graph shown. At which point is elasticity zero?

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