Deck 6: Elasticity

Question 1

Gas prices recently increased by 25%.In response, purchases of gasoline decreased by 5%.Based on this data, the price elasticity of demand for gas is:

A)5.
B)2.
C)0.2.
D)0.5.

Answer 1

C

Question 2

Egg producers know that the elasticity of demand for eggs is 0.1.If they want to increase sales by 5%, they will have to lower price by:
A.0.1%.
B.1%.
C.5%.
D.50%.

Answer 2

50%.

Question 3

If the estimated price elasticity of demand for foreign travel is 4, then:
A.a 20% decrease in the price of foreign travel will increase the quantity demanded by 80%.
B.the demand for foreign travel is inelastic.
C.a 10% increase in the price of foreign travel will increase the quantity demanded by 40%
D.a 20% increase in the price of foreign travel will increase the quantity demanded by 80%.

Answer 3

a 20% decrease in the price of foreign travel will increase the quantity demanded by 80%.

Question 4

The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair.Using the midpoint formula, what do they think is the price elasticity of demand?

A)2.5.
B)1.4.
C)0.7.
D)0.5.

Question 5

If the price of a good increases by 15% and the quantity demanded changes by 20%, then the price elasticity of demand is equal to:

A)0.75.
B)approximately 0.33
C)approximately 1.33.
D)1.

Question 6

The publisher of an economics textbook finds that when the book's price is lowered from $70 to $60, sales rise from 10,000 to 15,000.Using the midpoint method, the price elasticity of demand is:

A)500.
B)50.
C)3.5.
D)2.6.

Question 7

When actually calculated for a normal demand curve, the price elasticity of demand will be:
A.always positive.
B.always greater than 1.
C.usually equal to
D.1.always negative.

Question 8

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:
A.0.75.
B.approximately 0.33.
C.approximately 1.33.
D.1.

Question 9

Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day.Demand for gasoline in Orlando is:
A.price elastic.
B.price inelastic.
C.price unit-elastic.
D.perfectly price inelastic.

Question 10

Which of the following best describes the price elasticity of demand?
A.The price elasticity of demand measures the responsiveness of the change in the quantity demanded to a change in the price.
B.The price elasticity of demand measures the change in the price versus a change in the quantity demanded.
C.The price elasticity of demand measures the responsiveness of the change in the slope of the demand curve to a change in the price.
D.The price elasticity of demand measures the change in the slope of the demand curve versus a change in the quantity demanded.

Question 11

When the price goes down, the quantity demanded goes up.This price elasticity measures how:
A.much the price goes down.
B.much the equilibrium price goes up.
C.responsive the price change is in relation to an income change.
D.responsive the quantity change is in relation to the price change.

Question 12

(Table: Market for Pizza) Look at the table Market for Pizza.The price elasticity of demand for pizza between the prices of $14 and $12 per pizza when income is $1,000 per month is (use the midpoint method):

A)0.6.
B)1.
C)1.6.
D)2.

Question 13

The only producer of chocolate bunnies in the world, Choco's Bunny Company, recently expanded its production capacity from 1,000 to 2,000 bunnies per day.If the price elasticity of demand for bunnies is 3.33, by how much will the company need to reduce its price to sell the additional 1,000 bunnies (using the midpoint method)?

A)2.5%
B)25%
C)125%
D)20%

Question 14

A local restaurant has estimated that the price elasticity of demand for meals is equal to 2.If the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by ________and total revenue to _.

A)10%; increase
B)5%; stay constant
C)10%; fall
D)2.5%; fall

Question 15

The price elasticity of demand measures the:
A.responsiveness of the quantity demanded to a change in the price.
B.responsiveness of the price to a change in the quantity demanded.
C.extent to which prices are flexible and respond to market forces.
D.responsiveness of demand when the price is held constant and demand increases or decreases.

Question 16

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%.The price elasticity of demand is equal to ________ and demand is described as _.
A.0.2; inelastic
B.5; inelastic
C.0.2; elastic
D.5; elastic

Question 17

The price elasticity of demand is measured by:
A.dividing the percentage change in the price by the percentage change in the quantity demanded.
B.dividing the percentage change in the quantity demanded by the percentage change in the price.
C.subtracting the percentage change in the price from the percentage change in the quantity demanded.
D.adding the percentage change in the price to the percentage change in the quantity demanded.

Question 18

The price elasticity of demand is computed as the percentage change in the:
A.quantity demanded divided by the percentage change in the quantity supplied.
B.price divided by the percentage change in the quantity demanded.
C.quantity demanded divided by the percentage change in income.
D.quantity demanded divided by the percentage change in the price.

Question 19

The price elasticity of demand can be found by:
A.examining only the slope of the demand curve.
B.measuring absolute changes in the price and the quantity demanded.
C.comparing the percentage change in the quantity demanded to the percentage change in the price.
D.knowing that when the price changes, the quantity demanded goes in the opposite direction.

Question 20

The ratio of the percentage change in the quantity demanded to the percentage change in price is the:
A.price elasticity of demand.
B.quantity elasticity of demand.
C.income elasticity of demand.
D.cross-price elasticity of demand.

Question 21

Using the midpoint method to calculate the price elasticity of demand eliminates the problem of computing:
A.different elasticities, depending on whether price decreases or increases.
B.different elasticities, because price and quantity are inversely related on the demand curve.
C.total revenue when price falls and demand is inelastic.
D.total revenue when price falls and demand is elastic.

Question 22

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment BC, using the midpoint method, is:

A)greater than 3.33.
B)3.33.
C)3.
D)0.33.

Question 23

If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

A)0.5.
B)1.
C)2.
D)greater than 2.

Question 24

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

A)0.
B)0.5.
C)1.
D)2.

Question 25

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt.The price elasticity of demand (using the midpoint method) is:
A.greater than zero but less than 1.
B.equal to 1.
C.greater than 1 but less than 3.
D.greater than 3.

Question 26

If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (using the midpoint method) is:

A)0.5.
B)0.
C)1.
D)0.9.

Question 27

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.The price elasticity of demand for the segment EF, using the midpoint method, is:

A)1.3.
B)1.
C)0.7.
D)0.33.

Question 28

If the price of chocolate-covered peanuts decreases from $1.10 to $0.95 and the quantity demanded increases from 190 bags to 215 bags, then the price elasticity of demand (using the midpoint method) is:

A)1.25.
B)0.5.
C)0.8.
D)2.

Question 29

If the price of chocolate-covered peanuts decreases from $2.00 to $1.55 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

A)0.
B)0.5.
C)0.8.
D)2.

Question 30

If the price of chocolate-covered peanuts decreases from $1.15 to $1.05 and the quantity demanded increases from 190 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

A)0.5.
B)1.
C)2.
D)greater than 1.

Question 31

The price of notebooks is $5, and at that price consumers demand 12 notebooks.If the price rises to $7, consumers will decrease consumption to 4 notebooks.Using the midpoint formula, what is the price elasticity of demand for notebooks?

A)1/3
B)3
C)1/6
D)6

Question 32

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, then the price elasticity of demand (using the midpoint method) is:

A)0.
B)0.5.
C)1.
D)2.

Question 33

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie.The price elasticity of demand, using the midpoint method, is:
A.greater than zero but less than 1.
B.equal to 1.
C.greater than 1 but less than 3.
D.greater than 3.

Question 34

A men's tie store sold an average of 30 ties per day when the price was $5 per tie.The same store sold 60 of the same ties per day when the price was $3 per tie.In this case, the price elasticity of demand (using the midpoint method) is:
A.greater than zero but less than 1.
B.equal to 1.
C.greater than 1 but less than 3.
D.greater than 3.

Question 35

Figure: The Demand for Shirts
(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts.The price elasticity of demand for the segment AB, using the midpoint method, is:

A)13.
B)11.
C)0.91.
D)0.1.

Question 36

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (using the midpoint method) is:

A)0.
B)0.5.
C)1.
D)2.

Question 37

If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, then the price elasticity of demand (using the midpoint method) is:

A)0.5.
B)1.
C)2.
D)greater than 2.

Question 38

When the price of pencils decreases from $3 to $1, the quantity demanded increases from 100 to 200 pencils.Using the midpoint method, the price elasticity of demand equals:
A.1/6.
B.1/2.
C.2/3.
D.3/2.

Question 39

Figure: The Demand Curve for Oil (Figure: Demand Curve for Oil) Look at the figure The Demand Curve for Oil.The price elasticity of demand between $20 and $21, using the midpoint method, is approximately:

A)0.21.
B)0.49.
C)2.1.
D)4.9.

Question 40

Suppose at a price of $10 the quantity demanded is 100.When the price falls to $8, the quantity demanded increases to 130.The price elasticity of demand between the prices of $10 and $8, using the midpoint method, is approximately:

A)1.17.
B)1.50.
C)0.85.
D)1.00.

Question 41

Figure: The Demand for e-Books
(Figure: The Demand for e-Books) Look again at the figure The Demand for e-Books.What is the price elasticity of demand (using the midpoint method) when the price increases from $6 to $8?
A.5/9
B.1/2
C.1
D.2/3

Question 42

Suppose at a price of $10 the quantity demanded is 100.When the price falls to $8, the quantity demanded increases to 130.The price elasticity of demand (using the midpoint formula) between the prices of $10 and $8 is approximately:

A)1.17.
B)1.50.
C)0.85.
D)1.00.

Question 43

Table: Price Elasticity
(Table: Price Elasticity) Look at the table Price Elasticity.What is the price elasticity of demand (using the midpoint formula) between $2.50 and $2.25?
A.9
B.19
C.119
D.0.5

Question 44

Each month Jessica buys exactly 15 Big Macs regardless of the price.Jessica's price elasticity of demand for Big Macs is:

A)0.
B)1.
C)greater than 1.
D)less than 1 but greater than 0.

Question 45

Table: Price Elasticity
(Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $1.00 and $0.75?

A)0.54
B)0.66
C)0.75
D)1.0

Question 46

Table: Price Elasticity (Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $1.25 and $1.00?

A)0.60
B)0.82
C)1.0
D)1.6

Question 47

Table: Price Elasticity
(Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $0.75 and $0.50?

A)0.25
B)0.33
C)0.43
D)0.52

Question 48

Figure: The Demand Curve for Crossings (Figure: The Demand Curve for Crossings) Look at the figure The Demand Curve for Crossings.This graph examines the demand for crossing a bridge over a very large river.Using the midpoint method, the price elasticity of demand between $0.90 and $1.10 is approximately:

A)0.1.
B)0.2.
C)1.
D)1.9.

Question 49

Figure: The Demand Curve (Figure: The Demand Curve) Look at the figure The Demand Curve.Using the midpoint method, the price elasticity of demand between $8 and $9 is approximately:

A)0.18.
B)0.56.
C)1.8.
D)5.67.

Question 50

Figure: The Demand Curve (Figure: The Demand Curve) Look again at the figure The Demand Curve.Using the midpoint method, the price elasticity of demand between $1 and $2 is approximately:

A)0.16.
B)0.56.
C)1.8.
D)5.67.

Question 51

Figure: The Demand Curve (Figure: The Demand Curve) Look again at the figure The Demand Curve.Using the midpoint method, the price elasticity of demand between $6 and $7 is approximately:

A)0.19.
B)1.
C)1.86.
D)5.4.

Question 52

Table: Price Elasticity
(Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $1.50 and $1.25?

A)1.00
B)1.22
C)1.50
D)1.75

Question 53

Table: Price Elasticity
(Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $1.75 and $1.50?

A)0.42
B)1.5
C)1.86
D)0.08

Question 54

Table: Price Elasticity
(Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $2.25 and $2.00?

A)4.00
B)5.67
C)9.00
D)17.6

Question 55

Figure: The Demand Curve
(Figure: The Demand Curve) Look again at the figure The Demand Curve.Using the midpoint method the price elasticity of demand between $3 and $4 is approximately:

A)0.19.
B)0.54.
C)1.
D)1.86.

Question 56

Table: Price Elasticity
(Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $2.00 and $1.75?

A)2.33
B)3.00
C)4.00
D)0.125

Question 57

If the price of burritos increases from $4 to $6 and customers decrease their consumption from 20 to 10 burritos, what is the price elasticity of demand (using the midpoint method)?
A.5/3
B.2/3
C.3
D.2

Question 58

Each month Jacquelyn spends exactly $50 on ice cream regardless of the price of each container.Jacquelyn's price elasticity of demand for ice cream is:

A)0.
B)1.
C)greater than 1.
D)less than 1 but greater than 0.

Question 59

Figure: The Demand for e-Books
(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books.What is the price elasticity of demand (using the midpoint method) when the price decreases from $6 to
$4?
A.5/9
B.1/2
C.1
D.2/3

Question 60

Figure: The Demand Curve (Figure: The Demand Curve) Look again at the figure The Demand Curve.Using the midpoint method, the price elasticity of demand between $6 and $8 is approximately:

A)0.23.
B)0.45.
C)2.33.
D)4.5.

Question 61

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 160.In this price range, the demand for chocolate covered peanuts is _________ and total revenue will when the price increases.
A.elastic; increase
B.elastic; decrease
C.inelastic; increase
D.inelastic; decrease

Question 62

Suppose the price elasticity of demand for cheeseburgers equals 0.37.This means the overall demand for cheeseburgers is:
A.price elastic.
B.price inelastic.
C.price unit-elastic.
D.perfectly price inelastic.

Question 63

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama.To increase revenue, fishing lure manufacturers should:
A.lower prices in each state.
B.raise prices in each state.
C.lower prices in South Carolina and raise prices in Alabama.
D.leave prices unchanged in South Carolina and raise prices in Alabama.

Question 64

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180.If the price is $1.55, total revenue is , and if
the price is $2.00, total revenue is _.
A.$360; $440
B.$341; $279
C.$440; $279
D.$341; $360

Question 65

The price elasticity of demand for skiing lessons in New Hampshire is over 1.00.This means that the demand is in New Hampshire.

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

Question 66

Figure: The Demand Curve
(Figure: The Demand Curve) Between the prices of $4 and $5, demand is , and total
revenue will if price increases.
A.elastic; increase
B.elastic; decrease
C.inelastic; increase
D.inelastic; decrease

Question 67

The university hopes to raise more revenue by increasing parking fees.This plan will work only if:
A.the price effect is larger than the quantity effect.
B.the price effect is smaller than the quantity effect.
C.the price effect and quantity effect are the
D.same.there is no price or quantity effect.

Question 68

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags.In this price range, the demand for chocolate covered peanuts is _________ and total revenue will when price decreases.

A)elastic; increase
B)elastic; decrease
C)inelastic; increase
D)inelastic; decrease

Question 69

The university president believes that increasing student tuition by 5% will increase revenues.If the president is correct that revenues will increase, then the tuition increase will:
A.reduce the number of students enrolling by less than 5%.
B.reduce the number of students enrolling by more than 5%.
C.reduce the number of students enrolling by exactly 5%.
D.increase the number of students enrolling by 5%.

Question 70

Sonik, a local wireless phone company, tested the effect of a price reduction for text messaging.It lowered prices from $0.08 to $0.04 per message and found that the number of messages sent tripled.This means:
A.the demand for text messaging is inelastic in this price range.
B.the demand curve for text messaging shifted to the right.
C.the supply curve of text messaging shifted to the left.
D.the demand for text messaging is elastic in this price range.

Question 71

Total revenue is
A.total sales less total cost.
B.the price of a good times the quantity of the good that is sold.
C.the price effect times the quantity effect.
D.the price of a good divided by the amount of the good sold.

Question 72

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price.If the demand for beef is perfectly elastic, this rancher's quantity demanded will:
A.fall to 0.
B.not change.
C.fall slightly.
D.increase slightly.

Question 73

A perfectly price-inelastic demand curve is:
A.horizontal.
B.downward sloping.
C.upward sloping.
D.vertical.

Question 74

Figure: The Demand Curve
(Figure: The Demand Curve) If the price is $5, total revenue is _.
A.$5
B.$10
C.$20
D.$25

Question 75

A major state university in the South recently raised tuition by 12%.An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student out of about 300 said that he or she would transfer.Based on this information, the price elasticity of demand for education at this university is:
A.1.
B.highly elastic.
C.highly inelastic.
D.0.

Question 76

Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue.The airlines raise their prices on the assumption that:
A.consumer demand becomes more price-elastic as departure time approaches.
B.consumer demand becomes less price-elastic as departure time approaches.
C.consumers are not aware of airline prices.
D.consumer demand is unrelated to prices.

Question 77

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags.If the price is $1.10, total revenue is
______, and if the price is $0.95, total revenue is _.
A.$209; $204.25
B.$209; $236.50
C.$236.50; $209
D.$180.50; $209

Question 78

Figure: The Demand Curve
(Figure: The Demand Curve) If the price is $3, total revenue is _ .If the price is $4,
total revenue is _.
A.$21; $24
B.$21; $18
C.$12; 28
D.$7; $13

Question 79

Figure: The Demand Curve
(Figure: The Demand Curve) If the price is $8, total revenue is _ .If the price is $7,
total revenue is _.
A.$24; $16
B.$14; $21
C.$16; $21
D.$10; $10

Question 80

You manage a popular nightclub and lately revenues have been disappointing.Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues.You aren't sure who is right, but you do know that:

A)your bouncer thinks the demand for drinks is elastic, while your bartender thinks the demand for drinks is inelastic.
B)your bouncer thinks the demand for drinks is inelastic, while your bartender thinks the demand for drinks is elastic.
C)both the bouncer and bartender think the demand for drinks is elastic.
D)both the bouncer and bartender think the demand for drinks is inelastic.