Deck 18: The Price Elasticities of Demand and Supply

Question 1

Use the following figure to answer the question :
Assume that demand is elastic. Of the elasticities shown here, which is the lowest that would still be considered elastic?

A)10.0
B)1.01
C)1.00
D)0.01

Answer 1

1.01

Question 2

If a car dealership decides to offer a rebate to reduce the selling price of its cars and as a result finds an increase in its total revenues, then the demand for cars from this dealership is

A)price elastic.
B)price inelastic.
C)rebate inelastic.
D)unit elastic.
E)unknown.

Answer 2

price elastic.

Question 3

When elasticity is 0.1, demand is

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

Answer 3

inelastic.

Question 4

Use the following figure to answer the question :
The curve in the above graph

A)is a perfectly elastic demand curve.
B)is a perfectly inelastic demand curve.
C)is a very elastic demand curve.
D)is a very inelastic demand curve.

Question 5

Use the following figure to answer the question :
If price falls from $100 to $99 and quantity demanded rises from 2 to 3, the demand is

A)0.03
B)1.75
C)25.7
D)39.8

Question 6

An elasticity of 2 would be considered

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

Question 7

Use the following figure to answer the question :
The lowest elasticity in the above graph would be at point ____.

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

Question 8

If demand is inelastic and price is raised

A)quantity demanded will fall and total revenue will fall.
B)quantity demanded will fall and total revenue will rise.
C)quantity demanded will rise and total revenue will rise.
D)quantity demanded will rise and total revenue will fall.

Question 9

Use the following figure to answer the question :
In the above graph, unit elasticity would occur at approximately point ____.

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

Question 10

Use the following figure to answer the question :
If a 1% change in price leads to a 0.5% change in quantity demanded, then elasticity of demand is

A)0.5.
B)1.0.
C)1.5.
D)5.

Question 11

Use the following figure to answer the question :
If demand is elastic and price is lowered, total revenue will

A)rise.
B)fall.
C)stay the same.
D)possibly rise and possibly fall.

Question 12

Use the following figure to answer the question :
If demand is inelastic and price is lowered, total revenue will

A)rise.
B)fall.
C)stay the same.
D)possibly rise or possibly fall.

Question 13

Use the following figure to answer the question :
The lowest possible elasticity shown here is

A)10.
B)1.0.
C)0.1.
D)0.01.
E)0.001.

Question 14

Use the following figure to answer the question :
If price rises from $2 to $3 and the quantity demanded falls from 100 to 99, demand would be

A)0.03
B)0.67
C)1.23
D)5.81

Question 15

Use the following figure to answer the question :
If demand is elastic and price is raised, total revenue will

A)rise.
B)fall.
C)stay the same.
D)possibly rise or possibly fall.

Question 16

Which statement is false?

A)The most important determinant of the degree of elasticity is the availability of substitutes.
B)An elasticity of less than 1 is inelastic.
C)The advertiser wants to push her product's curve to the left and make is less elastic.
D)None of these statements are false.

Question 17

Which statement is true?

A)A perfectly elastic demand curve has an elasticity of zero.
B)Elasticity measures the change in quantity demanded in response to a change in price.
C)Elasticity of demand is found by dividing the percentage change in price by the percentage change in quantity.
D)None of these statements are true.

Question 18

When the price of CD players increases 5%, quantity demanded decreases 5%. The price elasticity for CD players is

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

Question 19

A demand curve that is perfectly horizontal is

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

Question 20

Use the following figure to answer the question :
An elasticity of 0.75 means that a 1% change in price will lead to a _____% change in quantity demanded.

A)0.25
B)0.75
C)2.5
D)7.5

Question 21

The elasticity all along a downward-sloping straight-line demand curve,

A)will be equal to -1 at all points.
B)will be different at each point on the curve.
C)will be equal to zero at all points.
D)will be constant.

Question 22

The elasticity closest to unit elastic would be

A)0.
B)0.2.
C)1.4.
D)5.
E)10.

Question 23

A perfectly inelastic demand curve is

A)a vertical line.
B)a horizontal line.
C)a line that slopes downward to the right.
D)a line that slopes upward to the right.

Question 24

Movement from the lower to the upper range of a downward-sloping straight-line demand curve indicates that demand is becoming

A)easier to estimate.
B)more inelastic.
C)harder to estimate.
D)more elastic.

Question 25

In general, the fewer the substitutes available for a good

A)the more inelastic the demand for the good.
B)the more elastic the demand for the good.
C)the greater the demand for the good.
D)the less the demand for the good.

Question 26

An elasticity of 1.5 means that a 1% change in price will lead to a _____% change in quantity demanded.

A)0.5
B)1.0
C)1.5
D)3.0
E)15

Question 27

Total revenue will increase if price

A)rises and demand is elastic.
B)rises and demand is unit elastic.
C)falls and demand is inelastic.
D)falls and demand is elastic.

Question 28

In general, the more the substitutes available for a good

A)the more inelastic the demand for the good.
B)the more elastic the demand for the good.
C)the greater the demand for the good.
D)the less the demand for the good.

Question 29

A firm that changes its price and sees no change in the total revenues it receives is facing demand that is

A)price inelastic.
B)revenue inelastic.
C)unit elastic.
D)price elastic.

Question 30

Use the following figure to answer the question :
Which statement is true?

A)D1 is more elastic than D2.
B)D2 is more elastic than D1.
C)D1 and D2 have the same elasticity.
D)There is no way to determine the relative elasticities of D1 and D2.

Question 31

Which of these elasticities is the least elastic?

A)1
B)10
C)100
D)0.9
E)0.1

Question 32

If more substitutes become available demand tends to become ____ elastic, and over time demand tends to become ____ elastic.

A)more; more
B)less; less
C)more; less
D)less; more

Question 33

Income elasticity of demand measures how ___________________.

A)responsive the quantity of one good demanded to a change in the price of another good
B)the consumption of various goods and services respond to change in income
C)the quantity demanded responds to a change in price
D)responsive the quantity supplied is to a change in price

Question 34

Which statement is true?

A)Over time demand tends to become less elastic.
B)The demand for cigarettes is very elastic.
C)Advertisers try to make the demand for their products less elastic.
D)None of these statements are true.

Question 35

If elasticity of demand is 4 and price is raised,

A)total revenue will fall.
B)total revenue will rise.
C)total revenue will remain constant.
D)there is no way to determine whether total revenue will rise, fall, or remain constant.

Question 36

A car dealership estimates that the elasticity of demand for its top models is 0.5. If it raises its prices by 10%,

A)quantity demanded will decrease by 5% and total revenue will increase.
B)there will be no change in either quantity demanded or total revenue because demand is inelastic.
C)quantity demanded will decrease by 5% and total revenue will decrease.
D)quantity demanded will decrease by 10% and total revenue will increase.

Question 37

If the elasticity of demand for a service is 0.4 and price is raised,

A)total revenue will fall.
B)total revenue will rise.
C)total revenue will stay the same.
D)there is no way to determine whether total revenue will rise, fall, or remain the same.

Question 38

The elasticity of demand for fish is estimated to be 3. If this estimate is accurate, then a 3% rise in price will

A)increase quantity demanded by 1%.
B)increase quantity demanded by 9%.
C)decrease quantity demanded by 1%.
D)decrease quantity demanded by 3%.
E)decrease quantity demanded by 9%.

Question 39

If consumers are price sensitive, then

A)they will have elastic demand curves.
B)they will have inelastic demand curves.
C)they will have no demand curve.
D)they will not shop around very much.
E)they likely perceive no close substitutes.

Question 40

Cross elasticity of demand measures the response in

A)the quantity of one good demanded to a change in the price of another good.
B)the income of consumers to the change in the price of goods.
C)the price of a good to a change in the quantity of another good demanded.
D)quantity of one good demanded when the quantity demanded of another good changes.

Question 41

When the cross elasticity of demand for two services is positive, then these services are _________.

A)complements
B)substitutes
C)both complements and substitutes
D)neither complements nor substitutes

Question 42

When the cross elasticity of demand is ________, the goods or services are ________.

A)zero; substitutes
B)negative; substitutes
C)positive; complements
D)positive; substitutes

Question 43

If the demand for table salt were perfectly inelastic at all prices, a decrease in supply would

A)increase the price and decrease the quantity demanded.
B)increase the price while not affecting the quantity demanded.
C)reduce the quantity demanded to zero no matter what the initial price.
D)have no effect on either price or quantity demanded.

Question 44

If a decrease in price leads to a decrease in total revenue,

A)demand is elastic.
B)demand is inelastic.
C)demand is unit elastic.
D)there is not enough information to determine the elasticity of demand.

Question 45

If you buy 10% more compact discs in response to a 20% increase in income, your income elasticity for compact discs is _____.

A)0.5
B)1.0
C)2.0
D)0.0

Question 46

Which is NOT a determinant of the elasticity of demand?

A)The proportion of income consumers spend on the good
B)The number of sellers
C)The availability of substitutes
D)Time

Question 47

If an increase in price leads to a decrease in total revenue,

A)demand is elastic.
B)demand is inelastic.
C)demand is unit elastic.
D)there is not enough information to determine the elasticity of demand.

Question 48

If income elasticity for a good or service is ______, then we can say that the good or service is _____.

A)negative; inferior
B)negative; normal
C)positive; inferior
D)zero; normal

Question 49

Along a downward-sloping straight-line demand curve,

A)demand is perfectly elastic when price is zero.
B)demand is unit elastic at all prices.
C)demand is very inelastic at high prices but becomes more elastic as price decreases.
D)demand is very elastic at high prices but becomes less elastic as price decreases.

Question 50

Which of these has the least elastic demand?

A)Chicken
B)Insulin (diabetes medicine)
C)Levi's jeans
D)Honda Civics

Question 51

When two goods are complementary goods, as the price of one of the goods goes _____, the quantity demanded of the other goes _____.

A)down; down
B)up; up
C)up; down
D)down; neither up nor down

Question 52

The demand for items on which we spend a large percentage of our income

A)will be perfectly inelastic.
B)will tend to be elastic.
C)will tend to be inelastic.
D)will be perfectly elastic.

Question 53

Demand is inelastic if

A)the percentage change in quantity is greater than the percentage change in price.
B)the elasticity of demand is less than 1.
C)the demand for the good is sensitive to changes in price.
D)more units will be purchased if the price increases.

Question 54

If income elasticity for a good or service is _____, then we can say that the good or service is _____.

A)zero; inferior
B)negative; normal
C)positive; inferior
D)positive; normal

Question 55

Since the cross elasticity of demand between hamburger patties and cheese is negative, these are ________ goods.

A)complementary
B)substitutable
C)normal
D)both complementary and substitutable

Question 56

If the income elasticity for Ramen Noodles is -3.0, we may conclude that Ramen Noodles are _________.

A)a normal good
B)an inferior good
C)both a normal good and an inferior good
D)neither a normal good nor an inferior good

Question 57

A perfectly elastic demand curve is

A)horizontal.
B)vertical.
C)upward sloping.
D)downward sloping.

Question 58

If demand is unit elastic a small increase in price will

A)raise total revenue.
B)lower total revenue.
C)not change total revenue.

Question 59

Cross elasticity is defined as the _______________.

A)percentage change in price of a one good (A), divided by the percentage change in the quantity demanded of a related good (B)
B)percentage change in quantity demanded for one good (A), divided by the percentage change in the price of a related good (B)
C)percentage change in quantity demanded for one good (A), divided by the percentage change in the price of that good (A)
D)change in quantity demanded for one good (A), divided by the change in the price of a related good (B)

Question 60

Which of these has the most elastic demand?

A)Filet Mignon steak
B)Bread
C)Heart medicine
D)Insulin (diabetes medicine)

Question 61

Use the following figure to answer the question :
Which statement is true about the demand curve in the graph?

A)Demand is perfectly elastic.
B)Demand is perfectly inelastic.
C)Demand is more elastic at point Q than at point T.
D)Demand is more elastic at point T than at point Q.

Question 62

Statement I: Over time the demand for most goods becomes more elastic. Statement II: The more uses a product has, the less elastic its demand.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 63

An elasticity of 1 would be considered

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

Question 64

What is the key difference between the short-run and long-run in terms of elasticity of supply?

A)Fixed productive capacity
B)Labor changes
C)No changes can be made to capital or labor
D)No difference

Question 65

Demand is inelastic when

A)the percentage change in quantity is greater than percentage change in price.
B)the percentage change in price is greater than percentage change in quantity.
C)the percentage change in price is equal to percentage change in quantity.

Question 66

Use the following figure to answer the question :
In the demand curve shown in the above graph we are closest to unit elasticity at point

A)point Q.
B)point R.
C)point S.
D)point T.

Question 67

When the demand elasticity of a service is ____, a small increase in price will lead to a decline of the same percentage in quantity.

A)10
B)1.0
C)0.0
D)0.1

Question 68

A sharp increase in the price of gasoline

A)will reduce daily gas consumption by more tomorrow than it will six months from now.
B)will reduce gasoline consumption more six months from now than it will tomorrow.
C)will cause an increase in quantity of gasoline demanded if demand is perfectly inelastic.
D)will cause an increase in the quantity of gasoline demanded if demand is perfectly elastic.

Question 69

If demand is elastic, then the elasticity of demand is

A)zero.
B)between zero and 1.
C)1.
D)more than 1.

Question 70

Which statement is true?

A)A vertical demand curve has zero elasticity.
B)A horizontal demand curve has zero elasticity.
C)Both vertical and horizontal demand curves have zero elasticity.
D)Neither vertical nor horizontal demand curves have zero elasticity.

Question 71

If the price elasticity of demand is zero for all prices, the demand curve is

A)horizontal.
B)vertical.
C)neither horizontal nor vertical.

Question 72

Among teenagers, the average demand for cigarettes is _________, ranging from 0.76 and 1.20.

A)highly inelastic
B)approximately unit elastic
C)highly elastic

Question 73

If elasticity of demand is 0.1, a 1% increase in price will lower quantity demanded by

A)0.01%.
B)0.1%.
C)1.0%.
D)10%.
E)100%.

Question 74

The __________ is the time immediately after a change in market price when sellers cannot respond by changing quantity supplied.

A)market period
B)short-run
C)long-run

Question 75

If a 1% change in price leads to a 2% change in quantity demanded, then the elasticity of demand is

A)0.5.
B)1.0.
C)1.5.
D)2.0.

Question 76

If the elasticity of demand for a good is 0.2, then the demand for that good is

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

Question 77

An elasticity of demand that would be considered very inelastic would be

A)0.1.
B)0.9.
C)1.0.
D)1.1.

Question 78

If the elasticity of demand for a service is 1, then the demand for that service is

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

Question 79

If elasticity of demand is 10, a 1% increase in price will lower quantity demanded by

A).1%.
B)1%.
C)10%.
D)100%.

Question 80

Use the following figure to answer the question :
Which statement is most likely true about the demand curve in the graph?

A)Point R is unit elastic, while point S is very inelastic.
B)Point T is very inelastic, while point Q is very elastic.
C)Point Q is very inelastic, while point T is very elastic.
D)Point Q is slightly elastic, while point S is very inelastic.