Deck 4: Elasticity

Question 1

If a 6 percent decrease in the price leads to a 5 percent increase in the quantity demanded, the price elasticity of demand is

A) 0.30.
B) 0.60.
C) 0.83.
D) 1.20.

Answer 1

0.83.

Question 2

The price elasticity of demand equals magnitude of the

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

Answer 2

percentage change in the quantity demanded divided by the percentage change in the price.

Question 3

A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities. In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore

A) lower in the smaller city as would be expected.
B) greater in the smaller city as would be expected.
C) certainly affected by population differences in different markets.
D) the same in Philadelphia as in Dover.

Answer 3

the same in Philadelphia as in Dover.

Question 4

The price elasticity of demand for purses is measured in what units?

A) dollars
B) purses
C) dollars per purse
D) The price elasticity of demand is a unitless measure.

Question 5

The price elasticity of demand depends on

A) the units used to measure price and the units used to measure quantity.
B) the units used to measure price but not the units used to measure quantity.
C) the units used to measure quantity but not the units used to measure price.
D) neither the units used to measure price nor the units used to measure quantity.

Question 6

The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

A) price of furniture will increase the quantity of furniture demanded by 1.3 percent.
B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent.
C) quantity of furniture demanded will decrease the price of furniture by 1.3 percent.
D) quantity of furniture demanded will increase the price of furniture by 1.3 percent.

Question 7

The price elasticity of demand is equal to the ________ in the ________ divided by the ________ in the ________.

A) percentage change; price; percentage change; quantity demanded
B) change; price; change; quantity demanded
C) percentage change; quantity demanded; percentage change; price
D) change; quantity demanded; change; price

Question 8

When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes

A) more elastic.
B) less elastic.
C) neither more nor less elastic.
D) undefined.

Question 9

A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is

A) 0.5.
B) 2.0.
C) 10.0.
D) 20.0.

Question 10

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the price elasticity of demand equals

A) 0.5.
B) 1.0.
C) 2.0.
D) 10.0.

Question 11

The price elasticity of demand for oranges ________ change if the units of the quantity was changed from pounds to kilograms and ________ change if the units of the price was changed from dollars to cents.

A) would; would
B) would; would not
C) would not; would
D) would not; would not

Question 12

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

A) price elasticity of demand.
B) the price elasticity of supply.
C) income elasticity of demand.
D) cross elasticity of demand.

Question 13

A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach is

A) 0.5.
B) 2.0.
C) 10.0.
D) 20.0.

Question 14

The price elasticity of demand is calculated as the absolute value of the

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

Question 15

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.

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

Question 16

Suppose the quantity of gasoline is measured in gallons and the price of gasoline is measured in dollars. The price elasticity of demand is 0.67. If the price of gasoline was now measured in cents rather than dollars, the price elasticity of demand would now be

A) 0.0067.
B) 0.67.
C) 6.7.
D) 67.0.

Question 17

The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the

A) quantity of oil demanded will result from a 0.5 percent increase in the price of oil.
B) quantity of oil demanded will result from a 0.5 percent decrease in the price of oil.
C) price of oil will increase the quantity of oil demanded by 0.5 percent.
D) price of oil will decrease the quantity of oil demanded by 0.5 percent.

Question 18

Elasticity measures the

A) percentage change in a variable.
B) slope of a curve.
C) change in a variable.
D) responsiveness of a variable to a change in another variable.

Question 19

The price elasticity of demand measures

A) how often the price of a good changes.
B) the slope of a budget curve.
C) how sensitive the quantity demanded is to changes in demand.
D) the responsiveness of the quantity demanded to changes in price.

Question 20

The price elasticity of demand is defined as the magnitude of 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 quantity demanded divided by the percentage change in price.
D) percentage change in price divided by the percentage change in quantity demanded.

Question 21

Suppose a drought increased the price of corn by 25 percent while it decreased the quantity by 50 percent. The price elasticity of demand equals

A) 2.00.
B) 0.50.
C) 20.0.
D) zero.

Question 22

Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is

A) 0.5.
B) 1.0.
C) 2.0.
D) 1000.0.

Question 23

A fall in the price of lemons from $10.50 to $9.50 per bushel increases the quantity demanded from 19,200 to 20,800 bushels. The price elasticity of demand is

A) 0.80.
B) 1.20.
C) 1.25.
D) 8.00.

Question 24

Taco Bell's economists determine that the price elasticity of demand for their tacos is 2.0. So, if Taco Bell raises the price of its tacos by 6.0 percent, the quantity demanded will decrease by ________ percent.

A) 2.0
B) 3.0
C) 6.0
D) 12.0

Question 25

Suppose the quantity demanded is 5 units when the price is $1.00. If the price rises to $2.00, the quantity demanded falls to 3 units. The price elasticity of demand is

A) 0.5.
B) 0.75.
C) 1.33.
D) 2.00.

Question 26

Using average price and average quantity, calculate the price elasticity of demand if a price rise from $8 to $10 and decreases the quantity demanded from 20 units to 15 units. The price elasticity of demand equals

A) 2.5.
B) 1.29.
C) 0.78.
D) 0.06

Question 27

If the quantity demanded of hamburgers increases by 20 percent when the price decreases by 5 percent, then the price elasticity of demand is

A) 0.25.
B) 4.0.
C) 20.0.
D) 5.0.

Question 28

If the price of a burger decreases by 5 percent and as a result the quantity of burgers demanded increases by 8 percent, the price elasticity of demand equals

A) 0.60.
B) 0.40.
C) 1.60.
D) 0.625.

Question 29

If the price of a soda increases from 75¢ to $1.00 and as a result the quantity demanded of sodas decreases from 10 to 9 per week, the elasticity of demand for sodas equals

A) 2.72.
B) 0.37.
C) 0.83.
D) 1.20.

Question 30

Suppose that the quantity of root beer demanded declines from 103,000 gallons per week to 97,000 gallons per week as a consequence of a 10 percent increase in the price of root beer. The price elasticity of demand is

A) 0.60.
B) 1.40.
C) 1.66.
D) 6.00.

Question 31

A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is

A) 0.80.
B) 1.20.
C) 1.25.
D) 8.00.

Question 32

Suppose that the quantity of pizza demanded decreased by 15 percent after an increase in price of 10 percent. What is the price elasticity of demand for pizza?

A) 1.50
B) 0.67
C) -1.50
D) -0.67

Question 33

A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. What is the price elasticity of demand in this case?

A) 1/2
B) -2
C) -1/2
D) 2

Question 34

Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals

A) 1.71.
B) 1.58.
C) 0.71.
D) 0.58.

Question 35

Last year the price of corn was $3 per bushel and the quantity of corn demanded was 8 million bushels. This year the price of corn is $4 per bushel and the quantity of corn demanded is 7 million bushels. Assuming that the demand curve has not shifted, what is the price elasticity of demand for corn? (Use the midpoint formula.)

A) 1
B) 0.47
C) 2.14
D) 0.29

Question 36

The worst drought in over 50 years has decimated crops of soy beans and corn in the United States. (Source: New York Times, August 10, 2012). Because the production of corn has decreased, prices are expected to increase by 25 percent. These data are insufficient for calculating the elasticity of demand because we also need to know the

A) percentage increase in income.
B) percentage increase in quantity.
C) percentage decrease in quantity.
D) increase in bushels per acre.

Question 37

Using the average price and average quantity, what is the elasticity of demand for oranges when the price of oranges changes from $200 to $160 per bushel and so the quantity demanded changes from 1000 to 1400 bushels?

A) 1.5
B) 0.1
C) 10.0
D) 0.67

Question 38

If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is

A) 2.0.
B) 4.0.
C) 0.5.
D) some amount that cannot be determined without more information.

Question 39

When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets?

A) 0.83
B) 1.20
C) 1.00
D) 2.32

Question 40

When the price of oranges increases from $4 to $6 per bag, the quantity demanded of oranges decreases from 800 bags to 700 bags. The price elasticity of demand over this price range is equal to

A) 3.
B) 3/7 or 0.4286.
C) 1/3 or 0.3333.
D) 1/4 or 0.25.

Question 41

The price of a good rises by 12 percent and the price elasticity of demand for the good is 0.85. Which of the following is a CORRECT interpretation of these facts?

A) When the price rises by 12 percent, the quantity demanded decreased by 0.85 percent.
B) For each 1 percent that the price rose, the quantity demanded decreased by 10.2 percent.
C) For each 0.85 percent that the price rose, the quantity demanded decreased by 1 percent.
D) For each 1 percent that the price rose, the quantity demanded decreased by 0.85 percent.

Question 42

A decrease in the supply of sugar increases the price of sugar from $1.00 a packet to $1.25 a packet. The quantity decreases from 100 packets a day to 80 packets a day. The price elasticity of demand of sugar is ________.

A) 0.75
B) 0.5
C) 1.0
D) 1.25

Question 43

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

A) by 10 percent
B) by 20 percent
C) by 25 percent
D) by 50 percent

Question 44

If the price elasticity of demand for a good is 0.8, then a

A) 1 percent rise in the price leads to a 0.8 percent decrease in the quantity demanded.
B) one dollar rise in the price leads to a 0.8 percent decrease in the quantity demanded.
C) 1 percent rise in the price leads to an 80 percent decrease in the quantity demanded.
D) 1 percent rise in the price leads to an 8 percent decrease in the quantity demanded.

Question 45

Suppose the price elasticity of teenagers' demand for cigarettes is 2.0. If the government imposes a tax on cigarettes that raises the price by 10 percent, by how much will it reduce teenaged smoking?

A) by 5 percent
B) by 10 percent
C) by 15 percent
D) by 20 percent

Question 46

The table above gives the demand schedule for snow peas. The price elasticity of demand between $6.00 and $7.00 per bushel is

A) 1.0.
B) 2.0.
C) 2.6.
D) 5.0.

Question 47

The price elasticity of demand for new cars is 1.2. Hence, a 10 percent price increase will

A) decrease the quantity of new cars demanded by 1.2 percent.
B) increase consumer expenditure on new cars by 1.2 percent.
C) decrease the quantity of new cars demanded by 12 percent.
D) increase consumer expenditure on new cars by 12 percent.

Question 48

The "Economics in Action" in the text mentions that the elasticity of demand for agricultural products is 0.42. If a drought boosts the price of corn 25 percent, then we can calculate the quantity of corn demanded ________.

A) increased by 10.5 percent
B) decreased by 10.5 percent
C) increased by 8.4 percent
D) decreased by 8.4 percent

Question 49

The table above gives the demand schedule for peas. Between point A and point B, the price elasticity of demand equals

A) 0.11.
B) 0.50.
C) 0.22.
D) 9.09.

Question 50

Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by

A) 200 percent.
B) 20 percent.
C) 2 percent.
D) 0.2 percent.

Question 51

The table above gives the demand schedule for peas. Which of the following statements CORRECTLY describes the price elasticity of demand?

A) The price elasticity of demand is larger at point A than at point B.
B) The price elasticity of demand is larger at point D than at point A.
C) The price elasticity of demand is constant because the slope is constant.
D) The price elasticity of demand increases moving from point A to point B to point C to point D to point E.

Question 52

The table above gives the demand schedule for snow peas. The demand curve for snow peas is a straight line and so the elasticity of demand is

A) 1 at all prices.
B) the same at all prices but not 1.
C) higher at higher prices.
D) lower at higher prices.

Question 53

If the price elasticity of demand for clothing is 0.64, this implies that

A) a 6.4 percent increase in price the price of clothing leads to a 10 percent decrease in the quantity demanded.
B) a 10 percent increase in the price of clothing leads to a 6.4 percent decrease in the quantity demanded.
C) if there is an increase in the price of clothing the total expenditures on clothing decreases.
D) Both answers A and C are correct.

Question 54

The table above gives the demand schedule for peas. Between point C and point D, the price elasticity of demand is

A) elastic.
B) unit elastic.
C) 0.75.
D) 3.00.

Question 55

According to one study, the price elasticity of demand for cigarettes is 0.25. To decrease the consumption of cigarettes by 8 percent, a tax on cigarettes must raise the price of cigarettes by

A) 32 percent.
B) 25 percent.
C) 2 percent.
D) 3.1 percent.

Question 56

The table above gives the demand schedule for snow peas. If the price of snow peas falls from $4.00 to $3.00 a bushel, total revenue will

A) increase because demand is elastic in this range.
B) decrease because demand is elastic in this range.
C) increase because demand is inelastic in this range.
D) decrease because demand is inelastic in this range.

Question 57

The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________ decrease in the quantity demanded.

A) 2 percent
B) 5 percent
C) 10 percent
D) 50 percent

Question 58

A shift of the supply curve of DVDs raises the price of a DVD from $9.50 to $10.50 a DVD and reduces the quantity demanded from 41 million to 39 million DVDs a month. The price elasticity of demand for DVDs is

A) 2 million DVDs a month per dollar.
B) $1 per 2 million barrels a day.
C) 0.5.
D) 2.0.

Question 59

Because of an increase in the price of leather, the price of a pair of women's dress shoes increased 12 percent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen?

A) Total expenditure on women's dress shoes decreases.
B) The number of pairs of women's dress shoes demanded decreases by 10.2 percent.
C) Total revenue from the sale of women's dress shoes decreases.
D) none of the above

Question 60

The price elasticity of demand for DVDs is 2. If the price of a DVD increased by 2 percent, the quantity demanded will ________.

A) decrease by 2 percent
B) not change
C) decrease by 4 percent
D) decrease by 1 percent

Question 61

A hot dog vendor on a street corner could increase the quantity of hot dogs her customers demand by 12 percent if she lowers the price of a hot dog 10 percent. The demand for the hot dogs is

A) cross elastic.
B) arc elastic.
C) unit elastic.
D) elastic.

Question 62

The figure shows the demand curve for popsicles. The price elasticity of demand when the price of a popsicle increases from $0.30 to $0.50 is ________.

A) 0
B) 1
C) 1/2
D) 2

Question 63

If the price elasticity is between 0 and 1, demand is

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

Question 64

If the price of a good increases from $3 to $4, and the quantity demand remains unchanged, then the demand is

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

Question 65

The price elasticity of demand can range between

A) zero and one.
B) negative infinity and infinity.
C) zero and infinity.
D) negative one and one.

Question 66

Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3, Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate truffles is ________.

A) elastic
B) unit elastic
C) illustrated by a horizontal demand curve
D) perfectly inelastic

Question 67

When the price elasticity of demand for a good equals

A) 0, the demand curve is vertical.
B) 0, the demand curve is horizontal.
C) 1, the demand curve is vertical.
D) 1, the demand curve is horizontal.

Question 68

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the demand for used cars is

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

Question 69

The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is ________ and a 1 percent increase in the price will ________ the quantity of hamburgers demanded by ________ percent.

A) 1.00; decrease; 0.40
B) 0.40; decrease; 0.40
C) 2.50; increase; 2.50
D) 5.00; decrease; 5.00

Question 70

A straight-line demand curve along which the price elasticity of demand equals 0 is one that

A) forms a 45 degree angle with the vertical axis.
B) forms a 60 degree angle with the horizontal axis.
C) is vertical.
D) is horizontal.

Question 71

When the percentage change in quantity demanded is less than the percentage change in price, the demand for the good is ________.

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

Question 72

If the quantity demanded changes by a relatively small amount for a given change in price, then demand is

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

Question 73

If demand is price elastic,

A) a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent.
B) a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent.
C) a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent.
D) the price is very sensitive to any shift of the supply curve.

Question 74

A good with a vertical demand curve has a price elasticity of demand that ________.

A) is equal to 1
B) is equal to infinite
C) is equal to zero
D) varies between 0 and 1

Question 75

Demand is price inelastic if a relatively ________ price increase leads to a relatively ________ in the quantity demanded.

A) large; small increase
B) small; large decrease
C) large; small decrease
D) small; large increase

Question 76

If a consumer is relatively insensitive to changes in the price of a good, then the consumer's demand for the good is

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

Question 77

Demand is inelastic if

A) a large change in quantity demanded results in a small change in price.
B) the quantity demanded is very responsive to changes in price.
C) the price elasticity of demand is less than 1.
D) the price elasticity of demand is greater than 1.

Question 78

If the price of salt increases and the quantity demanded does not change, then

A) the price elasticity of demand is equal to zero.
B) demand is perfectly inelastic.
C) the demand curve for salt is horizontal.
D) Both answers A and B are correct.

Question 79

Demand is perfectly inelastic when

A) shifts in the supply curve results in no change in price.
B) the good in question has perfect substitutes.
C) shifts of the supply curve result in no change in quantity demanded.
D) shifts of the supply curve result in no change in the total revenue from the quantity sold.

Question 80

If the demand for a good is elastic, when the price increases, the

A) demand will decrease.
B) quantity demanded will increase.
C) quantity demanded will decrease by a smaller percentage than the price increased.
D) quantity demanded will decrease by a greater percentage than the price increased.