Deck 4: Elasticity

Question 1

If the price of cheese falls by one percent and the quantity demanded rises by 3 percent,then the price elasticity of demand for cheese has a value of:

A) 30.
B) 0.30.
C) 0.333.
D)

Answer 1

D

Question 2

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent,then demand for textbooks is:

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

Answer 2

B
Explanation: If the percentage change in quantity is less than the percentage change in price,then the elasticity will be less than one.When elasticity is less than one,demand is price inelastic.

Question 3

If the price elasticity of demand for pineapple is 0.75,a 4% increase in the price of pineapple will lead to a:

A) 3% decrease in the quantity demanded of pineapple.
B) 3% increase in the quantity demanded of pineapple.
C) 4% decrease in the quantity demanded of pineapple.
D) 0.1875% increase in the quantity demanded of pineapple.

Answer 3

A
Explanation: Price elasticity of demand is the percentage change in quantity demanded divided by the percent change in price,here % change in quantity/4 = 0.75.The percent change in quantity must be 3.An increase in price will reduce quantity demanded,so the change is a decrease of 3%.

Question 4

If the price elasticity of demand for a good is greater than one,then the demand for that good,with respect to price,is:

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

Question 5

The price elasticity of demand for a good is the response of:

A) demand to a one percent change in price of that good.
B) demand to a one percent change in price of the related good.
C) quantity demanded to a one percent change in price of that good.
D) quantity demanded to a one percent change in price of the related good.

Question 6

If the price of a good increases by 20% and that leads to a decrease in quantity demanded by 60%,what is the price elasticity of demand for that good?

A) 30.
B) 3.
C) 1/3.
D) 1/6.

Question 7

When calculating price elasticity of demand,if the numerator is positive,the denominator is:

A) always greater than one.
B) always greater than zero.
C) sometimes positive and sometimes negative.
D) always less than zero.

Question 8

The percentage change in quantity demanded that results from the percentage change in price is known as the:

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

Question 9

If the price elasticity of demand for a good equals one,then the demand for that good with respect to price,is:

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

Question 10

The demand for a good is unitary elastic with respect to price if the price elasticity of demand is:

A) equal to one.
B) greater than one.
C) less than one.
D) greater than negative one.

Question 11

If the price elasticity of demand for cell phone service is 3,if the price increases by 1%,quantity demanded decreases by:

A) 0.33%.
B) 0.67%.
C) 1.33%.
D) 3%.

Question 12

Price elasticity of demand is a measure of:

A) consumer response to a change in a good's price.
B) a market's ability to restore equilibrium after a change in a good's price.
C) the demand for a good or service.
D) consumer response to excess demand.

Question 13

The demand for a good is elastic with respect to price if the price elasticity of demand is:

A) equal to one.
B) greater than one.
C) less than one.
D) equal to zero.

Question 14

The demand for a good is inelastic with respect to price,if the price elasticity of demand is:

A) equals one.
B) is greater than one.
C) is less than one.
D) equals negative one.

Question 15

If a 10% decrease in the price of good leads to a 20% increase in the quantity demanded of that good,the price elasticity of demand for that good would be:

A) ½.
B) 2.
C) 10.
D)

Question 16

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent,then the price elasticity of demand has a value of:

A) 0.05.
B) 0.5.
C) 2.
D)

Question 17

If the price elasticity of demand for chicken is 2,a 20% decrease in the price of chicken will lead to a:

A) 10% decrease in the quantity demanded of chicken.
B) 10% increase in the quantity demanded of chicken.
C) 40% decrease in the quantity demanded of chicken.
D) 40% increase in the quantity demanded of chicken.

Question 18

When the price of hot dogs is $1.50 each,500 hot dogs are sold every day.After the price falls to $1.35 each,510 hot dogs are sold every day.At the original price,what is the price elasticity of demand for hot dogs?

A) 66.67
B) 5
C) 2
D) 0.2

Question 19

If the price elasticity of demand for tickets to a football game is 2 then,when the price increases by 1%,quantity demanded decreases by:

A) ½%.
B) 1%.
C) 2%.
D) 4%.

Question 20

Price elasticity of demand is often expressed as a positive number because:

A) using the formula yields a positive number.
B) demand has a positive slope.
C) it's convenient to use absolute values even though the formula yields non-positive numbers.
D) both the numerator and the denominator in the formula are negative.

Question 21

Suppose that the company that owns all of the vending machines on your campus has doubled the price of a can of soda.They notice that they are selling approximately 15% fewer sodas.Price elasticity of demand for sodas from the campus vending machines is:

A) inelastic
B) unitary elastic
C) elastic
D) infinite

Question 22

If the price is $2.00 in both locations,the price elasticity of demand for a candy bar at an airport is likely to be _________ the price elasticity of demand for a candy bar in a grocery store.

A) less than
B) equal to
C) greater than
D) the reciprocal of

Question 23

Suppose that there is only one small clothing store in the remote village of Green Acres,and until recently all of the townspeople bought most of their shirts there.As more people in Green Acres become connected to the Internet,the price elasticity of demand for shirts at the Green Acres store will:

A) increase because the Internet offers more substitutes.
B) decrease because the Internet offers more substitutes.
C) remain the same,but the quantity demanded will decrease as more people shop online.
D) remain the same,but the quantity will decrease as more people shop online.

Question 24

Generally speaking,demand for a good will be more inelastic:

A) if few substitutes exist.
B) when the good represents a large share of the consumer's budget.
C) in the long run.
D) when many substitutes exist.

Question 25

Big-ticket items such as refrigerators have a(n)_____ price elasticity of demand compared to low budget items such as paper towels.

A) higher
B) lower
C) very low
D) equal

Question 26

Small budget items such as soap have ______ price elasticity of demand compared to big-ticket items such as flat-screen TVs.

A) higher
B) lower
C) very high
D) the same

Question 27

If consumers respond to a 10% price reduction by buying twice as much of a particular good,we would conclude that:

A) there was excess demand at the original price.
B) there was excess supply at the original price.
C) the absolute value of price elasticity at the original price was greater than one.
D) the absolute value of price elasticity at the original price was less than one.

Question 28

Suppose a 10% increase in the price of pain relievers leads to a 5% decrease in quantity demanded of pain relievers.The demand for pain relievers,with respect to price,is:

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

Question 29

Satellite TV is a close substitute for cable TV.In the 1990's,small satellite TV units were developed that made it more practical for individual consumers to subscribe to satellite TV service.This caused the price elasticity of demand for cable TV service to:

A) become more inelastic.
B) become less elastic.
C) become more elastic.
D) shift to the left.

Question 30

Jeans in general have fewer close substitutes than any specific brand of jeans.Therefore,the demand for jeans in general would be _______ than the demand for a specific brand of jeans.

A) more elastic
B) more inelastic
C) more unitary elastic
D) less inelastic

Question 31

When the price of NBA ticket is $25 each,30,000 tickets are sold every game.After the price rises to $30 each,20,000 tickets are sold every game.At the original price,the demand for NBA ticket is:

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

Question 32

If the percentage change in price for a good is equal to the percentage change in quantity demanded of that good,then the demand for that good,with respect to price,is:

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

Question 33

For which of the following products is demand likely to be least price elastic?

A) Frozen food
B) Soft drinks
C) Groceries
D) Diet Coke

Question 34

Suppose that the company that owns all of the vending machines on your campus has doubled the price of a can of soda,but they still sell almost the same number of sodas per day because:

A) students do not have good nutritional information.
B) soda purchases represent a large fraction of students' budgets.
C) there are few other places to purchase soda on campus.
D) price elasticity of demand for soda is almost unitary.

Question 35

If the demand for a good is elastic,that good is likely to have:

A) many close complements.
B) few close complements.
C) many close substitutes.
D) few close substitutes.

Question 36

When the demand for a good is inelastic,that good is likely to have:

A) many close complements.
B) few close complements.
C) many close substitutes.
D) few close substitutes.

Question 37

If the consumers cannot switch to a close substitute when the price of a good increases,the demand for that good is likely to be:

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

Question 38

If the percentage change in the price of a good is less than the percentage change in the quantity demanded of that good then the demand for that good,with respect to price,is:

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

Question 39

If the consumers can easily switch to a close substitute when the price of a good increases,demand for that good is likely to be:

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

Question 40

Suppose that the demand for electricity has been found to be inelastic.The most likely explanation for this finding is that:

A) electricity is a luxury commodity.
B) the fraction of income spent on electricity is large.
C) few substitutes exist for electricity.
D) electricity is a monopoly market.

Question 41

Price elasticity of demand for transportation generally is:

A) the same as price elasticity of the demand for bus tickets.
B) greater than price elasticity of the demand for bus tickets.
C) less than price elasticity of the demand for bus tickets.
D) greater than price elasticity of the demand for bus tickets when bus tickets are expensive,but less than price elasticity of the demand for bus tickets when the prices of bus tickets fall.

Question 42

Suppose you have one hour to catch a flight to Miami for spring break.It takes 45 minutes to drive to the airport.Your car is almost out of gas;the price of gas at the closest gas station is higher than at the one on the other side of the town.To you,the price elasticity of demand for gas is likely to be ______ than it would be if you had several hours before the flight.

A) higher
B) more inelastic
C) more elastic
D) no different

Question 43

The following graph depicts demand.
Refer to the figure above.The price elasticity of demand at point D is:

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

Question 44

The following graph depicts demand.
Refer to the figure above.At point D,demand is:

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

Question 45

Suppose two demand curves have a point in common.With respect to price at that point,demand shown by the steeper curve will be _______ the less steep curve.

A) more elastic than
B) less elastic than
C) as elastic as
D) more likely to be unitary than

Question 46

If the elasticity of demand for the latest American Idol CD is 1.4,this means:

A) few substitutes exist.
B) a 1% increase in the price leads to a 14% reduction in quantity demanded.
C) a 10% decrease in the price leads to a 140% increase in quantity demanded.
D) a 5% increase in the price leads to a 7% decrease in quantity demanded.

Question 47

The following graph depicts demand.
Refer to the figure above.The price elasticity of demand at point B is:

A) 3/4.
B) 4/3.
C) 3.
D) 1/3.

Question 48

The following graph depicts demand.
Refer to the figure above.The slope of the demand curve (if you ignore the negative sign)is:

A) 2.
B) 1.5.
C) 1.
D) 0.5.

Question 49

Assume the price of gasoline doubles tonight and remains at that price for the next two years.The short-term price elasticity of demand for gasoline will be ______ when compared with the long-term price elasticity of demand for gasoline.

A) more elastic
B) larger in absolute value
C) the same
D) more inelastic

Question 50

The following graph depicts demand.
Refer to the figure above.The price elasticity of demand at point C is:

A) 3/16.
B) 16/3.
C) 3/4.
D) 3/8.

Question 51

Demand tends to be _______ in the short run than in the long run.

A) more elastic
B) more inelastic
C) more volatile
D) less important

Question 52

If the quantity demanded of a good is Q when the price for the good is P,the price elasticity of demand for that good at that point is:

A) (P/Q)*(1/slope)
B) (Q/P)*(1/slope)
C) (P/Q)*(slope)
D) Q*P*(1/slope)

Question 53

Economists have found that the price elasticity of demand for water is higher in the summer than in the winter.Why?

A) Winter is longer than summer,and price elasticity is lower over longer time horizons.
B) Winter is longer than summer,and price elasticity is higher over longer time horizons.
C) Winter water use tends to be for necessities like cleaning and cooking,and summer water use tends to be for both necessities and non-necessities,like gardening and recreation.
D) People take more vacations in the summer and so use less water at home.

Question 54

If the slope of the demand curve is -0.167,price is $8 and quantity demanded is 12 units,then demand for this good is:

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

Question 55

The following graph depicts demand.
Refer to the figure above.The price elasticity of demand at point A is:

A) 5/2.
B) 5/8.
C) 2/5.
D) 8/5.

Question 56

The following graph depicts demand.
Refer to the figure above.At point A,demand is:

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

Question 57

Price elasticity of demand is _______ the slope of the demand curve.

A) not related to
B) inversely related to
C) positively related to
D) equal to

Question 58

If the slope of the demand curve is -1.4,price is $5 and quantity demanded is 13 units,the price elasticity of demand is:

A) 0.27.
B) 0.38.
C) 1.4.
D) 1.8.

Question 59

Suppose that the short run price elasticity of demand for electricity is 0.03 and the long run price elasticity of demand is 1.2.One would classify the short run elasticity as being ___________ and the long run elasticity as being ____________.

A) elastic;elastic
B) elastic;inelastic
C) inelastic;unitary elastic
D) inelastic;elastic

Question 60

The reason a brand name item (e.g. ,Tyson chicken)has a larger price elasticity than a class of items (e.g. ,chicken),is because:

A) there are fewer substitutes for Tyson chicken.
B) it takes a lot of time to adjust to a substitute brand of chicken.
C) the share of income spent on "chicken" is larger than spent on "Tyson Chicken".
D) there are fewer substitutes for chicken than for Tyson chicken.

Question 61

A perfectly elastic demand curve has a slope of ______ while a perfectly inelastic demand curve has a slope of ______.

A) infinity;0
B) 1;0
C) 0;1
D) 0;infinity

Question 62

If the demand curve for a good is the line defined by Q = 1,then a decrease in the price of that good will:

A) decrease the quantity demanded.
B) increase the quantity demanded.
C) result in a quantity of zero being demanded.
D) not change the quantity demanded.

Question 63

For any horizontal demand curve,the calculated price elasticity of demand is:

A) 0.
B) 1.
C) infinity.
D) equal to the price of the good.

Question 64

Firms that produce goods with many substitutes will find that:

A) lowering price increases total revenues.
B) lowering price decreases total revenues.
C) raising price increases total revenues.
D) lowering price leaves total revenues unchanged.

Question 65

Suppose the price price P gives us a price elasticity of demand equal to 1.It is on the ______ portion of the demand curve.

A) elastic
B) unitary elastic
C) inelastic
D) steepest

Question 66

If consumers completely cease purchasing a product when its price increases by any amount,demand is classified as:

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

Question 67

At the midpoint of a straight-line demand curve,the price elasticity of demand is always:

A) greater than one.
B) less than one.
C) unitary.
D) zero.

Question 68

On a given linear demand curve,demand is ______ at high prices than at low prices.

A) more price elastic.
B) more price inelastic.
C) more negative.
D) more volatile.

Question 69

Suppose the demand curve for open-heart surgery is vertical among people with serious heart conditions.Therefore,demand for open-heart surgery is _____ with respect to price.

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

Question 70

As one moves down along a linear demand curve (i.e. ,from high price,low quantity pairs to low price,high quantity pairs),the demand:

A) becomes more price elastic.
B) increases.
C) decreases.
D) becomes less price elastic.

Question 71

If the slope of the demand curve is zero,the price elasticity of demand is:

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

Question 72

Suppose that a new drug has been approved to treat a life-threatening disease.Demand for that drug is shown on the graph below.Prior to approval of this drug,the only treatment for this condition was non-prescription pain relief.Demand for one brand of non-prescription pain reliever is also shown on the graph below.
Refer to the figure above.At a price of $15,price elasticity of demand for the new drug is _______ price elasticity of demand for an over-the-counter pain reliever.

A) greater than
B) less than
C) the same as
D) the reciprocal of

Question 73

Which determines whether a company will earn higher revenues when it raises its price?

A) The cost of the inputs.
B) Government regulation of the industry.
C) Consumer demand.
D) Companies always earn higher revenues when they increase price.

Question 74

If the percent change in quantity demanded is zero for any percent change in the price,demand is classified as:

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

Question 75

If the slope of the demand curve is equal to infinity,the price elasticity of demand will be:

A) zero.
B) infinite.
C) one.
D) equal to the price of the good.

Question 76

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1.Any price higher than P will lie on the _______ part of the demand curve,and any price lower than P will lie on the _______ part of the demand curve.

A) elastic;inelastic
B) unitary elastic;inelastic
C) inelastic;elastic
D) elastic;unitary elastic

Question 77

When the price of insulin was $10,consumers demanded 100 units;when the price was $15,consumers demanded 100 units;and when the price was $20,consumers demanded 100 units.Based on this information,insulin must have a(n)_______ demand curve.

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

Question 78

A demand curve that is drawn as a vertical line illustrates price elasticity equal to:

A) 0.
B) 1.
C) infinity.
D) the quantity.

Question 79

If a demand curve is the line defined by P = $5,the absolute value of the price elasticity of demand is:

A) 5.
B) 0.2.
C) 0.
D) infinity.

Question 80

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1.This price is on the ______ portion of the demand curve.

A) elastic
B) unitary elastic
C) inelastic
D) steepest