Deck 4: Elasticity

Question 1

When consumers' buying decisions are highly influenced by price,we say that their demand curve is:

A)highly elastic.
B)less elastic.
C)not very sensitive to changes in the price.
D)unit elastic.

Answer 1

highly elastic.

Question 2

The concept of elasticity can be applied to:

A)changes in demand,but not supply.
B)changes in supply,but not demand.
C)changes in both supply and demand.
D)neither supply nor demand.

Answer 2

changes in both supply and demand.

Question 3

The concept of elasticity can be used to measure responses to a change in:

A)the price of a good.
B)the price of a related good.
C)income.
D)All of these are true.

Answer 3

All of these are true.

Question 4

The most commonly used measures of elasticity are:

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

Question 5

If a good has a less elastic demand curve:

A)then a small percentage change in price will cause a large change in quantity demanded.
B)then any percentage change in price will take a long time to cause a response in quantity demanded.
C)then a large percentage change in price will cause a small change in quantity demanded.
D)then any percentage change in price will cause an almost immediate response in quantity demanded.

Question 6

Elasticity measures:

A)how much a market will respond to a change in market conditions.
B)how much consumers and producers will respond to a change in market conditions.
C)how quickly consumers and producers will respond to a change in market conditions.
D)how quickly a market will respond to a change in market conditions.

Question 7

The mid-point method of calculating elasticity is often used because:

A)it allows us to have a consistent way to estimate the elasticity of demand between two points,regardless of the direction of the movement.
B)it is easier to calculate.
C)it is universally understood by all economists.
D)the negative sign can then be ignored.

Question 8

The percentage change in the quantity demanded of a good or service when its price changes by one percent is:

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

Question 9

Suppose when the price of calculators is $10,the quantity demanded is 100,and when the price is $12,the quantity demanded drops to 80.Using the mid-point method,the price elasticity of demand is:

A)1.5.
B)0.81.
C)150 percent.
D)81 percent.

Question 10

If a good has a highly elastic demand curve,then:

A)a small percentage change in price will cause a large change in quantity demanded.
B)a small percentage change in price will cause virtually no change in quantity demanded.
C)a large percentage change in price will cause a small change in quantity demanded.
D)any percentage change in price will cause an almost immediate response in quantity demanded.

Question 11

The calculated price elasticity of demand:

A)is always a negative number,although many times is reported as an absolute value.
B)is sometimes a negative number,depending on the magnitude of response.
C)is always a positive number,because price and quantity are directly related in terms of demand.
D)can be positive or negative,but is always reported as an absolute value.

Question 12

Mathematically,price elasticity of demand is:

A)the percentage change in the quantity of a good that is demanded in response to a given percentage change in price.
B)the percentage change in the price of a good that is demanded in response to a given percentage change in quantity.
C)the percentage change in the quantity of a good that is supplied in response to a given percentage change in price.
D)the percentage change in the price of a good that is supplied in response to a given percentage change in quantity.

Question 13

The mid-point method of calculating elasticity:

A)measures the percentage change relative to a point midway between the two points.
B)measures the absolute change relative to a point midway between the two points.
C)measures the percentage change relative to a point midway between demand and supply.
D)None of these is true.

Question 14

When a large percentage change in price causes a small percentage change in the quantity demanded,we say that they have a:

A)very elastic demand.
B)less elastic demand.
C)low magnitude of response.
D)high magnitude of response.

Question 15

When consumers' buying decisions are less sensitive to changes in price,we say that their demand curve is:

A)highly elastic.
B)less elastic.
C)very sensitive to changes in the price.
D)unit elastic.

Question 16

Economists use the percentage change in quantity rather than the absolute change in quantity because:

A)percentage changes are easier to calculate than absolute changes.
B)the measured elasticity is the same regardless of the unit of measurement for quantity.
C)absolute changes are confusing to convert.
D)absolute changes often result in negative numbers.

Question 17

Different measurements of elasticity include:

A)income elasticity of demand,income elasticity of supply.
B)price elasticity of demand,price elasticity of supply.
C)cross-price elasticity of demand,income elasticity of supply.
D)preference elasticity of demand,cross-price elasticity of supply.

Question 18

If supply and demand analysis is a measure of how,then elasticity is a measure of:

A)how much.
B)when.
C)why.
D)how quickly.

Question 19

When a small percentage change in price causes a large percentage change in the quantity demanded,we say that they have a:

A)highly elastic demand.
B)highly inelastic demand.
C)low magnitude of response.
D)high magnitude of response.

Question 20

Price elasticity of demand describes:

A)the size of the percentage change in the quantity demanded of a good or service when its price changes by one percent.
B)the size of the shift in demand of a good or service when its price changes by one percent.
C)the size of the percentage change in the quantity supplied of a good or service when its demand changes due to a price change.
D)None of these is true.

Question 21

Pencils are likely ____________ than diamonds because ___________.

A)less price elastic;they have more available substitutes
B)more price elastic;they have more available substitutes
C)less price elastic;they cost much less than a diamond
D)more price elastic;they have more practical uses

Question 22

Suppose when the price of mascara is $12,the quantity demanded is 400,and when the price is $8,the quantity demanded is 500.Using the mid-point method,the price elasticity of demand is:

A)0.56.
B)1.8.
C)56.
D)180.

Question 23

If the price of hairbrushes decreases by 20 percent,the quantity demanded increases by 2 percent.the price elasticity of demand is:

A)0.1,and is elastic.
B)10 and is elastic.
C)0.1 and is inelastic.
D)10 and is inelastic.

Question 24

Suppose when the price of movie tickets is $5,the quantity demanded is 500,and when the price is $7,the quantity demanded is 300.Using the mid-point method,the price elasticity of demand is:

A)1.51.
B)0.66.
C)151 percent.
D)66 percent.

Question 25

Cars are _________ than yachts because _______________.

A)less price elastic;they have more available substitutes
B)more price elastic;they have more available substitutes
C)less price elastic;they are more of a necessity good
D)more price elastic;they are more of a necessity good

Question 26

A cup of coffee is ______________ than dinner out at a fancy restaurant because _________________.

A)less price elastic;it is a smaller portion of one's income
B)more price elastic;it is a smaller portion of one's income
C)less price elastic;it is more of a luxury good
D)more price elastic;it is more of a luxury good

Question 27

Farmfresh brand apple juice is likely to be:

A)very price elastic,since there are many close substitutes available.
B)less price elastic,since there are many close substitutes available.
C)very price elastic,since the adjustment time is so fast.
D)less price elastic,since the adjustment time is so slow.

Question 28

We need to calculate the price elasticity of demand because:

A)producers need to know that consumers are more sensitive to price changes for some goods and services than for others.
B)producers need to be able to predict the future preferences of their customers.
C)producers need to know that consumers will have the same response to a price change regardless of the good or service.
D)producers need to understand what it is their customers demand the most.

Question 29

When a good has a lot of close substitutes available,it is likely to be:

A)more price elastic than goods without close substitutes available.
B)less price elastic than goods without close substitutes available.
C)more price elastic than those with a lot of complement goods available.
D)less price elastic than those with a lot of complement goods available.

Question 30

A pack of gum is ______________ than a steak because _______________.

A)less price elastic;it is a smaller portion of one's income
B)more price elastic;it is a smaller portion of one's income
C)less price elastic;they are more of a luxury good
D)more price elastic;they are more of a luxury good

Question 31

Suppose when the price of a cookie is $2.50,the quantity demanded is 50,and when the price is $1,the quantity demanded is 200.Using the midpoint method,the price elasticity of demand is:

A)1.4.
B)0.72.
C)140.
D)72.

Question 32

If the price of a DVD decreases by 50 percent,the quantity demanded increases by 75 percent.The price elasticity of demand is:

A)1.5 and is elastic.
B)1.5 and is inelastic.
C)0.67 and is elastic.
D)0.67 and is inelastic.

Question 33

Novels are _____________ than textbooks because __________________.

A)less price elastic;they have more available substitutes
B)more price elastic;they have less available substitutes
C)less price elastic;they have less available substitutes
D)more price elastic;they have more available substitutes

Question 34

Suppose when the price of a can of tuna is $1,the quantity demanded is 250,and when the price is $2,the quantity demanded is 100.Using the mid-point method,the price elasticity of demand is:

A)1.28.
B)0.78.
C)128 percent.
D)78 percent.

Question 35

A box of corn flakes cereal is likely to be:

A)very price elastic,since there are many close substitutes available.
B)less price elastic,since there are many close substitutes available.
C)very price elastic,since the cereal is a unique product.
D)less price elastic,since the cereal is a unique product.

Question 36

Many say that there is no substitute for a real diamond.This would imply that diamonds:

A)are price elastic.
B)are price inelastic.
C)are unit elastic.
D)are not a sustainable market.

Question 37

Spring break vacations are _________________ than tuition payments because ________________.

A)less price elastic;they have more available substitutes
B)more price elastic;they have less available substitutes
C)less price elastic;they are more of a luxury good
D)more price elastic;they are more of a luxury good

Question 38

If the price of a cup of coffee increases by 50 percent,the quantity demanded decreases by 50 percent.The price elasticity of demand is:

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

Question 39

Some of the determinants of the price elasticity are:

A)availability of substitutes,cost relative to benefit,and scope of market.
B)degree of necessity,cost relative to income,scope of market,and adjustment time.
C)availability of complements,cost relative to income,and scope of market.
D)cost relative to income,scope of demand,and adjustment time.

Question 40

If the price of a good increases by 10 percent,its quantity demanded drops by 50 percent.The price elasticity of demand is:

A)1.
B)0.2.
C)5.
D)2.

Question 41

Markers are _______________________ than Sharpies because ____________________.

A)less price elastic;it is a smaller portion of one's income
B)more price elastic;it is a smaller portion of one's income
C)less price elastic;the scope of the market is more broadly defined
D)more price elastic;the scope of the market is more broadly defined

Question 42

A perfectly elastic demand:

A)means people are extremely sensitive to a change in price.
B)means demand will drop to zero if the price changes by any amount.
C)is demonstrated by a horizontal demand curve.
D)All of these are true.

Question 43

Ice cream is _________________ than frozen treats because ________________.

A)less price elastic;it is a smaller portion of one's income
B)more price elastic;it is a smaller portion of one's income
C)less price elastic;the scope of the market is less broadly defined
D)more price elastic;the scope of the market is less broadly defined

Question 44

A perfectly inelastic demand:

A)means people will not respond to any change in price.
B)means people will respond to any change in price.
C)means demand will drop to zero if the price changes by any amount.
D)is demonstrated by a perfectly horizontal demand curve.

Question 45

A perfectly inelastic demand:

A)means people will not respond to any change in price.
B)means quantity demanded will stay constant regardless of the price.
C)is demonstrated by a perfectly vertical demand curve.
D)All of these are true.

Question 46

Dolls are __________________ than Barbie dolls because ___________________.

A)less price elastic;the scope of the market is more broadly defined
B)more price elastic;the scope of the market is more broadly defined
C)less price elastic;they have more available substitutes
D)more price elastic;they have more available substitutes

Question 47

The resulting change in the quantity of gas demanded of increasing prices over the last decade:

A)has been more elastic than it has been in the last six months.
B)has been less elastic than it has been in the last six months.
C)has been relatively the same over that time period.
D)has become a non-issue for people now that they are used to high gas prices.

Question 48

A perfectly inelastic demand is one in which:

A)the demand curve is perfectly vertical.
B)the demand curve is perfectly horizontal.
C)the measured elasticity is exactly 1.
D)the response to a change in price is immediate.

Question 49

Shoes are ___________________ than sneakers because __________________.

A)less price elastic;the scope of the market is less broadly defined
B)more price elastic;the scope of the market is less broadly defined
C)less price elastic;the scope of the market is more broadly defined
D)more price elastic;the scope of the market is more broadly defined

Question 50

The response in demand of a price increase in subways rides:

A)will be more elastic in six weeks than in six months.
B)will be less elastic in six weeks than in six months.
C)will be the same over that time period.
D)is unpredictable without more information.

Question 51

A pound of coffee is _________________ than a pound sugar of because ________________.

A)less price elastic;it is a larger portion of one's income
B)more price elastic;it is a larger portion of one's income
C)less price elastic;people will have a longer time to adjust to the change in its price
D)more price elastic;people will have a longer time to adjust to the change in its price

Question 52

Classical music is _______________ than Beethoven's music because _______________.

A)less price elastic;it is a smaller portion of one's income
B)more price elastic;it is a smaller portion of one's income
C)less price elastic;the scope of the market is more broadly defined
D)more price elastic;the scope of the market is more broadly defined

Question 53

Steak is _______________________ than food because _____________________.

A)less price elastic;the scope of the market is more broadly defined
B)more price elastic;the scope of the market is more broadly defined
C)less price elastic;the scope of the market is less broadly defined
D)more price elastic;the scope of the market is less broadly defined

Question 54

The demand for insulin is:

A)likely to be perfectly inelastic over some range of prices.
B)perfectly elastic.
C)a large portion of someone's income.
D)low relative to the supply.

Question 55

The longer people have to adjust to a price change:

A)the more elastic their demand will be.
B)the less elastic their demand will be.
C)will not affect the elasticity of their response unless it is a luxury good.
D)will not affect the elasticity of their response unless the good is a necessity.

Question 56

A movie ticket is _________________ than a ticket to a Broadway show because ______________.

A)less price elastic;it is a smaller portion of one's income
B)more price elastic;it is a smaller portion of one's income
C)less price elastic;it has less available substitutes
D)more price elastic;it has less available substitutes

Question 57

A perfectly elastic demand is one in which:

A)the demand curve is perfectly vertical.
B)the demand curve is perfectly horizontal.
C)measured elasticity is exactly 1.
D)the response to a change in price is immediate.

Question 58

Ben & Jerry's ice cream is _________________ than all ice cream because _______________.

A)less price elastic;the scope of the market is less broadly defined
B)more price elastic;the scope of the market is less broadly defined
C)less price elastic;it has less available substitutes
D)more price elastic;it has less available substitutes

Question 59

A horizontal demand curve implies:

A)a perfectly inelastic demand.
B)demand will drop to zero if the price changes by any amount.
C)price elasticity is equal to one.
D)people will not respond to any change in price.

Question 60

A subway ride is ___________________ than a car because ___________________.

A)less price elastic;it is a smaller portion of one's income
B)more price elastic;it is a smaller portion of one's income
C)less price elastic;people will have a longer time to adjust to the change in its price
D)more price elastic;people will have a longer time to adjust to the change in its price

Question 61

An increase in price:

A)causes a decrease in revenue due to the price effect.
B)causes an increase in revenue due to the price effect.
C)causes an increase in revenue due to the quantity effect.
D)None of these is true.

Question 62

A good whose demand is unitary elastic refers to:

A)one in which the absolute value of the percentage change in the quantity demanded exactly equals the absolute value of the corresponding percentage change in price.
B)one in which the absolute value of the percentage change in quantity exactly equals one.
C)one in which the absolute value of the percentage change in price exactly equals one.
D)one in which both the absolute value of the percentage change in quantity demanded and the absolute value of the corresponding percentage change in price equals one.

Question 63

Assuming elasticity is reported in absolute value,a unit elastic good:

A)has a measured elasticity of greater than zero.
B)has a measured elasticity of greater than one.
C)has a measured elasticity of less than one.
D)has a measured elasticity of exactly one.

Question 64

Assuming elasticity is reported in absolute value,a measured elasticity of one implies:

A)the percentage change in quantity demanded will exactly equal the percentage change in price.
B)the percentage change in quantity demanded will always exactly equal one.
C)both the percentage change in price and quantity demanded exactly equal one.
D)None of these is true.

Question 65

Total revenue is:

A)the amount that a firm receives from the sale of goods and services.
B)the amount that a firm keeps after all expenses are paid.
C)the amount of sales that get reinvested in the firm.
D)the amount a firm receives from dividends.

Question 66

An increase in price:

A)causes a quantity effect.
B)causes a price effect.
C)causes a decrease in revenue that results from selling fewer units of the good,and a simultaneous increase in revenue that results from receiving a higher price for each unit sold.
D)All of these are true.

Question 67

In general,the more elastic a demand curve is:

A)the flatter it will be.
B)the steeper it will be.
C)the more bowed-in it will be.
D)the faster it will shift when price changes.

Question 68

A decrease in price:

A)causes a quantity effect,which is an increase in revenue that results from selling fewer units of the good.
B)causes a price effect,which is a decrease in revenue that results from receiving a lower price for each unit sold.
C)causes both a price effect and quantity effect.
D)All of these are true.

Question 69

When the quantity effect outweighs the price effect:

A)a price increase will cause a drop in revenue.
B)a price increase will cause an increase in revenue.
C)a price decrease will cause a decrease in revenue.
D)None of these is true.

Question 70

Assuming elasticity is reported in absolute value,an inelastic demand has a measured elasticity:

A)of greater than zero.
B)of greater than one.
C)of less than one.
D)of exactly one.

Question 71

Assuming elasticity is reported in absolute value,a measured price elasticity of demand of 1.2 would indicate:

A)an elastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price.
B)an inelastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price.
C)an elastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price.
D)an inelastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price.

Question 72

Assuming elasticity is reported in absolute value,an elastic demand has a measured elasticity:

A)greater than one.
B)less than one.
C)of exactly one.
D)greater than zero and less than one.

Question 73

A decrease in price:

A)causes a decrease in revenue due to the quantity effect.
B)causes an increase in revenue due to the price effect.
C)does not necessarily have to experience a quantity effect when the demand curve is downward sloping.
D)None of these is true.

Question 74

A good that has a unit elastic demand:

A)has a perfectly horizontal demand curve.
B)has a perfectly vertical demand curve.
C)has a measured elasticity greater than 1.
D)None of these is true.

Question 75

The amount that a firm receives from the sale of goods and services is:

A)total profit.
B)total revenue.
C)total cost.
D)total benefit.

Question 76

Knowing the price elasticity of demand is important in business because:

A)it allows a manager to determine whether a price increase will cause total revenue to rise or fall.
B)it allows a manager to determine whether an increase in supply will cause total profit to rise or fall.
C)it allows a manager to determine how to maximize the firm's profits.
D)it allows a manager to determine whether a price increase will cause the demand to rise or fall.

Question 77

Assuming elasticity is reported in absolute value,a measured elasticity of greater than one implies:

A)the good is elastic.
B)the good is inelastic.
C)the good is unitary elastic.
D)Cannot be determined without more information.

Question 78

Assuming elasticity is reported in absolute value,a measured elasticity of less than one implies:

A)the good is elastic.
B)the good is inelastic.
C)the good is unitary elastic.
D)Cannot be determined without more information.

Question 79

If a manager were to multiply the quantity sold by the price paid for each unit,he would calculate:

A)total profit.
B)total revenue.
C)total cost.
D)total benefit.

Question 80

Assuming elasticity is reported in absolute value,a measured price elasticity of demand of 0.4 would indicate:

A)an elastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price.
B)an inelastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price.
C)an elastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price.
D)an inelastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price.