Deck 4: Elasticity

Question 1

The reason that someone buys a lot more paintings when the price of art falls is that

A) there are many substitutes for paintings.
B) paintings are a necessity.
C) they complement his or her home décor.
D) his or her income has risen.
E) art is a luxury.

Answer 1

there are many substitutes for paintings.

Question 2

Zumba classes sell 20 participant spots at a price of $4.50 each.When the instructor raised the prices to $5.50,10 people attended the class.From the midpoint method,the price elasticity of demand for Zumba is

A)-0.50.
B) -3.33.
C) -2.50.
D) 0.20.
E) -0.20.

Answer 2

-3.33.

Question 3

When the price increases by 30 percent and the quantity demanded drops by 30 percent,the price elasticity of demand is

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

Answer 3

unitary elastic

Question 4

What does the price elasticity of demand measure?

A) what direction the demand curve shifts when the income changes
B) what direction the demand curve shifts when the price changes
C) how much the demand curve shifts when the price changes
D) a producer's sensitivity to a price change
E) a consumer's sensitivity to a price change

Question 5

Salima is a devoted Coca-Cola consumer,whereas Antonia can drink either Coca-Cola or Pepsi products.Salima's demand for Coca-Cola will be relatively more ________,while Antonia's demand will be relatively more ________.

A) elastic; inelastic
B) unrelated to price; elastic
C) perfectly elastic; elastic
D) inelastic; elastic
E) unitary elastic; inelastic

Question 6

At a price of $2,the quantity demanded for pens is 12.When the price increases to $3,the quantity demanded for pens is 10.The price elasticity of demand for pens is

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

Question 7

Nicolette raised her quantity demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per puck.Using the midpoint method,her price elasticity of demand is

A) 0.80.
B)-1.25.
C) -1.00.
D) 0.40.
E) -0.80.

Question 8

Celine runs a sporting goods store and knows that the price elasticity of demand for her sports clothing line is -1.5.She is planning to lower prices by 10 percent.The percentage change in quantity demanded will be

A) 15 percent.
B) 0.15 percent.
C) 6.66 percent.
D) 0.06 percent.
E) 8.50 percent.

Question 9

Price elasticity of demand is measured as 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 price divided by the percentage change in quantity demanded.
D) percentage change in demand divided by the percentage change in income.
E) percentage change in quantity demanded divided by the percentage change in price.

Question 10

If a friend says,"I am never going to buy another Avicii remix again!" his or her price elasticity of demand for Avicii remixes is

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

Question 11

Suppose that when the price of cereal rises 10 percent,the quantity demanded of cereal falls by 5 percent.Based on this information,what is the approximate price elasticity of demand for cereal?

A) 0.5
B)-0.5
C) 2.0
D)-2.0
E) 0

Question 12

Price elasticity of demand measures the change in

A) quantity demanded due to the change in price.
B) demand due to the change in price.
C) quantity demanded due to the change in price of another good or service.
D) price due to a change in quantity demanded.
E) price due to the change in demand.

Question 13

In the accompanying table,assume that the price of ice skates increases from $10 to $20 per pair.Using the midpoint method,what is the price elasticity of demand for ice skates for hockey players?

A) -6.00
B) 0.67
C) 0.11
D) -0.16
E) 3.00

Question 14

Assume that a family spends 35 percent of its income on housing,20 percent on travel-related expenses,10 percent on utilities,25 percent on health care,and 5 percent on miscellaneous items.Demand for which category will be most responsive to a change in price?

A) miscellaneous
B) health care
C) utilities
D) travel-related expenses
E) housing

Question 15

From the accompanying table,we would expect that,for recreational skaters,the price elasticity of demand for ice skates between $10 and $20 to be ________ than that of hockey players because ________.

A) more elastic; ice skates are a normal good
B) less elastic; ice skates are an inferior good
C) the same; they both skate
D) more elastic; recreational skaters can substitute other activities
E) less elastic; hockey players need skates

Question 16

Lewis has a fixed budget and buys all of the items listed below.When will a 20 percent reduction in price cause him to change the amount he buys the most?

A) scented candles,regular price is $25
B) jasmine rice,regular price is $4/lb
C) GAP jeans,regular price is $75
D) flat-screen LCD TV,regular price is $400
E) living room couch,regular price is $300

Question 17

Which of the following would NOT affect a good's price elasticity of demand?

A) whether the good is a necessity
B) the proportion of the budget devoted to the good
C) the number of substitute goods
D) the ease of substituting between the goods
E) the cost of producing the good

Question 18

At a price of $5/hour,Karina wants to hire three workers.When the price rises to $7/hour,she wants to hire only two workers.Karina's price elasticity of demand for workers is

A) -0.83.
B)-1.20.
C) -0.33.
D) -0.40.
E) -0.10.

Question 19

When the price of scooters drops by 5 percent,the quantity demanded changes by 20 percent.We know that the price elasticity of demand for scooters is

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

Question 20

If the elasticity of demand for Good A is -3,a 33 percent decrease in quantity demanded of Good A results from a(n)________ in the price of Good A.

A) 99 percent decrease
B) 99 percent increase
C) 11 percent decrease
D) 11 percent increase
E) 33 percent decrease

Question 21

A producer knows that the price elasticity for his product is -0.5.He wants to increase quantity demanded by 30 percent.By what percentage does he need to change the price?

A) 10 percent
B) 6 percent
C) -9.5 percent
D) -60 percent
E) -6 percent

Question 22

Which of the following statements are true about demand and the price elasticity of demand?

A) When the demand curve has a negative slope,the price elasticity of demand is infinite.
B) When the demand curve has a negative slope,the price elasticity of demand is zero.
C) When the demand curve has a negative slope,the price elasticity of demand is positive.
D) When the demand curve has a negative slope,the price elasticity of demand is negative.
E) When the demand curve has a negative slope,the price elasticity of demand is positive

Question 23

When quantity demanded and price increase by 10 percent,you know that price and quantity are ________ to the consumer.

A) equally important
B) everything
C) nothing
D) relatively important
E) relatively unimportant

Question 24

"No matter the price,I will always buy five gallons of ice cream a week.I love ice cream!" This statement reflects a price elasticity of demand that is

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

Question 25

When the demand curve is perfectly horizontal the demand curve has

A) zero elasticity.
B) a large,but not infinite,elasticity.
C) perfect elasticity.
D) a small,but nonzero,elasticity.
E) negative elasticity.

Question 26

If the price elasticity of demand for Good A is -0.2 and the price increases from $2.25 to $2.75,the percentage change in the quantity demanded of Good A is

A) -100 percent.
B) 100 percent.
C) 4.0 percent
D) -4.0 percent.
E) unknown because not enough information is provided.

Question 27

If a business finds that demand for its good is very price elastic,it knows that

A) price is very important.
B) price is unimportant.
C) price is unrelated.
D) the effect of price is less important than the impact of the quantity consumers buy.
E) the quantity consumers buy is unimportant.

Question 28

When the price elasticity of demand is elastic,a consumer is

A) completely unresponsive to a change in price.
B) relatively unresponsive to a change in price.
C) unaffected by a change in price.
D) relatively responsive to a change in price.
E) completely responsive to a change in price.

Question 29

Demand is almost always more price elastic in the long run because

A) people's preferences change.
B) newer versions of a good or service replace older ones.
C) production of the good or service stops.
D) more options become available and people can make different choices.
E) government regulations increase.

Question 30

To keep the percentage change in quantity demanded equally proportional to the percentage change in price when the prices rise by 5 percent,a consumer would need to ________ quantity demanded by ________.

A) increase; 5 percent
B) decrease; 5 percent
C) increase; 10 percent
D) decrease; 10 percent
E) increase; 2 percent

Question 31

If the price elasticity of demand is -4.0,a 5 percent decrease in price will increase quantity demanded by

A) 0.8 percent.
B) 1.25 percent.
C) 20 percent.
D) 80 percent.
E) 125 percent.

Question 32

Kenji tells the manager at Moo's Ice Cream that he won't buy any ice cream cones costing more than $2,but he will buy a limitless number at any price less than $2.His price elasticity of demand for ice cream cones is

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

Question 33

The price elasticity of demand is always

A) positive.
B) negative.
C) equal to -1.
D) equal to zero.
E) equal to infinity.

Question 34

Suppose that the price elasticity of demand is -0.80 for aspirin.We could then say that the demand for aspirin is

A) elastic.
B) inelastic.
C) unitary elastic.
D) infinitely elastic.
E) unable to be determined with the provided information.

Question 35

When the price elasticity of demand is -0.6,then a ________ increase in price leads to a ________ in quantity demanded.

A) 10 percent; 6 percent increase
B) 10 percent; 6 percent decrease
C) 6 percent; 6 percent increase
D) 1 percent; 6 percent decrease
E) 6 percent; 1 percent decrease

Question 36

When the quantity demanded is less sensitive to a change in price,then the absolute value of the price elasticity of demand is

A) smaller.
B) larger.
C) close to infinity.
D) close to 1.
E) unaffected by the change in sensitivity.

Question 37

The Sunny Softball league found that when it changed its ticket prices from $10 to $5,there was a more than proportional but not infinite increase in attendance.The price elasticity of demand is

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

Question 38

When the demand curve is vertical

A) the price elasticity of demand is negative.
B) the price elasticity of demand is positive.
C) the demand for the good is perfectly elastic.
D) the price elasticity of demand is equal to zero.
E) the price elasticity of demand is equal to -1.

Question 39

If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15 percent,what is the percentage change in the price of Good A?

A) -10 percent
B) -0.10 percent
C) -11.50 percent
D) -1 percent
E) 11.50 percent

Question 40

Refer to the accompanying table.When the price drops from $5 to $3,price elasticity of demand for sushi (using the midpoint method)at an income of $30,000 is

A) 0.71.
B) 0.67.
C) 0.10.
D) 0.33.
E) -0.67.

Question 41

In a typical demand curve,the price elastic portion of demand is found in the ________ region and the price inelastic portion of demand is found in the ________ region of the graph.

A) middle; lower
B) lower; upper
C) upper; lower
D) middle; middle
E) None of these choices are correct.

Question 42

The local bakery calculates the price elasticity of demand for its cinnamon rolls to be -1.25.This tells the owners that demand is ________ and price is ________ to the buyer.

A) inelastic; less important than the quantity
B) elastic; more important than the quantity
C) unitary elastic; on the same level as quantity
D) perfectly inelastic; everything
E) perfectly elastic; meaningless

Question 43

Sellers of bottled water find that whether the price falls or rises,the quantity bought by consumers remains unchanged every week.The price elasticity of demand for bottled water is

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

Question 44

When the total revenue is unchanged despite the change in price,demand is

A) elastic.
B) inelastic.
C) unitary elastic.
D) horizontal.
E) vertical.

Question 45

When the price of softballs is high,a ________ in price will raise total revenue.When the price is low,the seller should ________ the price to increase total revenue.

A) decrease; raise
B) rise; raise
C) decrease; decrease
D) rise; decrease
E) decrease; not change

Question 46

Cell phone companies found that when they raised the price of connecting to wireless hot spots,demand decreased more than proportionally among casual users but decreased less than proportionally among businesspeople.This is because wireless connectivity is a(n)________ good for casual users but a(n)________ good for businesspeople.

A) elastic; inelastic
B) luxury; necessity
C) normal; inferior
D) inelastic; elastic
E) inferior; normal

Question 47

As we move left along the demand curve,the price elasticity of demand

A) becomes more inelastic.
B) becomes more elastic.
C) does not change.
D) becomes infinite.
E) moves closer to zero.

Question 48

As we move right along a demand curve,the price elasticity of demand

A) becomes more inelastic.
B) becomes more elastic.
C) does not change.
D) becomes infinite.
E) moves closer to zero.

Question 49

When the total revenue and price both move in the same direction (are directly related),demand is

A) elastic.
B) inelastic.
C) unitary elastic.
D) horizontal.
E) vertical.

Question 50

At higher prices,the price elasticity of demand is likely to be ________,whereas it is likely to be ________ at lower prices.

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

Question 51

From the accompanying table,we can see that the demand curve for ice skates by hockey players will be ________ the demand curve for recreational skaters.

A) steeper than
B) flatter than
C) unrelated to
D) the same as
E) the inverse of

Question 52

There was a more than proportional decrease in quantity demanded for cupcakes when the local baker raised the price by 20 percent.The price elasticity of demand for cupcakes is

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

Question 53

Assume that the market for pencils is in equilibrium and that demand is very price elastic.The popularity of digital tablets and electronic pens increases and demand for pencils declines.The equilibrium change in quantity demanded is

A) zero.
B) relatively small.
C) proportional to the shift in demand.
D) relatively large.
E) infinite.

Question 54

Refer to the following graphs to answer the following questions.
A. B. C. D. E.
Which graph most likely shows the price elasticity of demand for the following situation: Lin's Boots can sell out its entire stock of shoe polish at $2.50 but can sell none if it raises the price to $2.55?

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

Question 55

Refer to the following graphs to answer the following questions.
A. B. C. D. E.

-Which of these graphs most likely depicts a price elasticity of demand of -5?

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 56

When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today?

A) tomorrow
B) in 6 months
C) in 2 years
D) in 8 years
E) in 15 years

Question 57

Refer to the following graphs to answer the following questions.
A. B. C. D. E.
Which of these graphs represents perfectly price inelastic demand for a good?

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 58

Refer to the following graphs to answer the following questions.
A. B. C. D. E.
Which of these graphs represents relatively price elastic demand for a good?

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 59

Refer to the following graphs to answer the following questions.
A. B. C. D. E.

-Which of these graphs most likely depicts a price elasticity of demand of -0.2?

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 60

Lee says that he will always spend $20 a week on lattes.Lee's demand for lattes is price

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

Question 61

Firms are indifferent to changing prices when the price elasticity of demand is

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

Question 62

How can a firm increase total revenue?

A) when demand is inelastic and the price decreases
B) when demand is inelastic and the price increases
C) when demand is elastic and the price increases
D) when demand is unitary elastic and the price decreases
E) when demand is unitary elastic and the price increases

Question 63

Refer to the accompanying table.The price elasticity of demand of erasers is ________ when the price is lowered from $1.50 to $1.00.Sellers of erasers will ________ their total revenue from this price change.

A) perfectly elastic; not change
B) elastic; raise
C) elastic; lower
D) inelastic; lower
E) inelastic; raise

Question 64

When Kelsey decreases her price of lipstick from $7 to $5,she finds that her sales increase from 6 to 7.She faces ________ demand for her product,and this price change will ________ her total revenue.

A) elastic; raise
B) inelastic; lower
C) unitary elastic; not change
D) perfectly elastic; raise
E) perfectly inelastic; lower

Question 65

Winged Treasures is a specialty store that sells butterfly ornaments.The owner wants to increase her total revenue and knows that the price elasticity of demand for her product is -0.4.What should she do to her price?

A) lower it by a relatively large amount
B) leave it unchanged and use another way to increase sales
C) decrease it to zero
D) raise it by any amount
E) lower it by a relatively small amount

Question 66

Use the following scenario to answer the following questions: Dairy Wishes,a local ice cream store,finds that it sells out of ice cream sandwiches at the current price of $1.It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.
The owners raised the price because they believed that the demand for ice cream sandwiches is

A) inelastic.
B) elastic.
C) relatively price sensitive.
D) perfectly elastic.
E) unitary elastic.

Question 67

The city of Huntsville is known for its wide variety of ice cream shops.What will happen if Nicola's Ice Cream Castle raises the price of its shakes?

A) Demand will decrease by a greater proportion than the price.
B) Demand will increase by a greater proportion than the price.
C) The quantity demanded will decrease by a greater proportion than the price.
D) The quantity demanded will increase by a greater proportion than the price.
E) Demand will not change.

Question 68

Use the following scenario to answer the following questions: Dairy Wishes,a local ice cream store,finds that it sells out of ice cream sandwiches at the current price of $1.It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.
The demand for ice cream sandwiches is

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

Question 69

Pepsi vendors who raise their price at professional sporting events increase total revenue because the price elasticity of demand is ________.When they raise their prices at gas stations,they decrease total revenue because the price elasticity of demand is ________.

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

Question 70

When the price elasticity of demand is -0.66,a decrease in price will

A) lead to no changes in total revenue.
B) increase total revenue.
C) reduce total revenue.
D) decrease the quantity.
E) lead to no changes in quantity.

Question 71

When can a firm lower prices and still increase revenue?

A) when the elasticity of demand is equal to unity
B) when the demand curve is horizontal
C) when the demand curve is vertical
D) when the demand is inelastic
E) when the demand is elastic

Question 72

Income elasticity of demand is defined as

A) the change in price divided by change in income.
B) the change in demand divided by the change in income.
C) the change in demand divided by change in income.
D) the percentage change in demand divided by percentage change in income.
E) the percentage change in demand divided by percentage change in price.

Question 73

The local National Hockey League (NHL)team decides to lower its ticket prices in order to attract more fans.It is hoping that the

A) price elasticity of demand is perfectly inelastic.
B) price decrease matters more than the quantity increase to total revenue.
C) quantity increase matters more than the price decrease to total revenue.
D) price elasticity of demand is unitary elastic.
E) price elasticity of demand is perfectly elastic.

Question 74

While there are many pizza places in Kutztown,Pappy's Pizza is known for its distinctive deep-dish pizza with an almost pie-like crust,whereas Momma's Pizza is comparable to many other restaurants.Pappy's is likely to find that it can ________ prices to increase total revenue,and Momma's must ________ prices to increase total revenue.

A) raise; lower
B) lower; raise
C) raise; raise
D) lower; lower
E) raise; not change

Question 75

A 15 percent increase in the price of cookies results in a 9 percent decrease in the quantity of cookies sold.The revenue received by cookie suppliers will ________ because the price elasticity of demand for cookies is ________.

A) decrease; inelastic
B) increase; elastic
C) decrease; elastic
D) not change; unitary elastic
E) increase; inelastic

Question 76

A local merchant raises the price of his good and finds that his total revenues increase.The demand for this good is

A) inelastic.
B) elastic.
C) relatively price sensitive.
D) perfectly elastic.
E) unitary elastic.

Question 77

For which of the following products should sellers raise the price in order to increase total revenue from college students?

A) blue hooded sweatshirts
B) Gatorade
C) concert tickets
D) textbooks
E) spaghetti sauce

Question 78

How can a firm increase total revenue?

A) when demand is elastic and price decreases
B) when demand is elastic and price increases
C) when demand is unitary elastic and price increases
D) when demand is unitary elastic and price decreases
E) when demand is inelastic and price decreases

Question 79

When Heavenly Cookies prices its sugar cookies at $1.00,it sells 75 cookies.It lowers the price to $0.50 and sells 200 cookies.Its total revenue ________ because the price elasticity of demand for sugar cookies is ________.

A) rose; elastic
B) rose; inelastic
C) fell; elastic
D) fell; inelastic
E) stayed the same; unitary elastic

Question 80

Income elasticity refers to

A) percentage change in quantity demanded divided by the percentage change in price.
B) movement down along a demand curve.
C) movement up along a demand curve.
D) horizontal shift of a demand curve.
E) vertical shift of a demand curve.