Deck 4: Elasticity: The Responsiveness of Demand and Supply

Question 1

Figure 4.1
Refer to Figure 4.1.What is the demand curve on which elasticity changes at every point given?

A) Panel A
B) Panel B
C) Panel C
D) None of the above graphs

Answer 1

C

Question 2

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?

A) It is inelastic at high prices and elastic at low prices.
B) It is unit-elastic throughout the demand curve.
C) It is elastic at high prices and inelastic at low prices.
D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Answer 2

C

Question 3

Figure 4.4
Refer to Figure 4.4.The inelastic segment of the demand curve________.

A) is coincident with the horizontal axis.
B) is coincident with the vertical axis.
C) lies below the midpoint of the curve.
D) lies above the midpoint of the curve.

Answer 3

C

Question 4

A demand curve which is ________ represents perfectly inelastic demand,and a demand curve which is ________ represents inelastic demand.

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

Question 5

Figure 4.4
Refer to Figure 4.4.At the midpoint of the demand curve,in absolute value________.

A) the price elasticity coefficient is at a maximum.
B) the price elasticity coefficient is at a minimum.
C) the price elasticity coefficient is zero.
D) the price elasticity coefficient is one.

Question 6

Which of the following statements about price elasticity of demand is false?

A) The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope.
B) If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic.
C) The value of the price elasticity of demand along a downward-sloping demand curve is always negative.
D) A linear downward-sloping demand curve has a varying price elasticity coefficient.

Question 7

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a tonne to $180 a tonne and quantity sold decreased from 800 tonnes to 240 tonnes.The absolute value of the price elasticity of demand is ________.

A) 0.11
B) 0.37
C) 2.69
D) 9.33

Question 8

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

A) 1.67
B) 1.0
C) 0.6
D) 0.53

Question 9

Figure 4.3
Refer to Figure 4.3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

A) 0.32
B) 0.4
C) 2.5
D) 3.125

Question 10

Seth is a competitive body builder.He says he has to have his 12 oz package of protein powder to 'feed his muscles' every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?

A) It is elastic.
B) It is perfectly elastic.
C) It is perfectly inelastic.
D) The price elasticity coefficient is 0.

Question 11

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

A) 0.17
B) 0.62
C) 1.62
D) 5

Question 12

Figure 4.4
Refer to Figure 4.4.Which of the following statements is true about the price elasticity of demand?

A) The elasticity coefficient is constant along the demand curve.
B) The elastic portion of a straight-line downward-sloping demand curve corresponds to the segment above the midpoint.
C) The inelastic portion of the demand curve corresponds to the segment above the midpoint.
D) At the midpoint of the demand curve, the elasticity coefficient is zero.

Question 13

Figure 4.1
Refer to Figure 4.1.On which panel is a perfectly inelastic demand curve shown?

A) Panel A
B) Panel B
C) Panel C
D) Panel D

Question 14

The price elasticity of demand for Stork ice cream is −4.Suppose you are told that following a price increase,quantity demanded fell by 10 per cent.What was the percentage change in price that brought about this change in quantity demanded?

A) 40 per cent
B) 25 per cent
C) 2.5 per cent
D) 0.4 per cent

Question 15

What does price elasticity of demand measure?

A) How responsive suppliers are to price changes
B) How responsive sales are to changes in the price of a related good
C) How responsive quantity demanded is to a change in price
D) How responsive sales are to a change in buyers' incomes

Question 16

Suppose the value of the price elasticity of demand is −3.This means that________.

A) a 1 per cent increase in the price of the good causes quantity demanded to increase by 3 per cent.
B) a 1 per cent increase in the price of the good causes quantity demanded to decrease by 3 per cent.
C) a 3 per cent increase in the price of the good causes quantity demanded to decrease by 1 per cent.
D) a $1 increase in price causes quantity demanded to fall by 3 units.

Question 17

If demand is inelastic,what is the absolute value of the price elasticity of demand?

A) One
B) Less than one
C) Greater than one
D) Greater than the absolute value of the slope of the demand curve

Question 18

If demand is perfectly inelastic,what is the absolute value of the price elasticity of demand?

A) Zero
B) Less than one
C) More than one
D) Equal to the absolute value of the slope of the demand curve

Question 19

Figure 4.1
Refer to Figure 4.1 A perfectly elastic demand curve is shown in ______.

A) Panel A
B) Panel B
C) Panel C
D) Panel D

Question 20

If the percentage increase in price is 15 per cent and the value of the price elasticity of demand is - then what is the quantity demanded?

A) Will increase by 45 per cent
B) Will increase by 5 per cent
C) Will decrease by 45 per cent
D) Will decrease by 5 per cent

Question 21

What concept do economists use to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price?

A) Slope
B) Efficiency
C) Relativity
D) Elasticity

Question 22

Carrie Bradshaw claims that when it comes to buying shoes,'price is no object'.If this is true,then what is her demand for shoes?

A) Perfectly elastic
B) Perfectly inelastic
C) Unit-elastic
D) Horizontal

Question 23

To calculate the price elasticity of demand we divide________.

A) the percentage change in quantity demanded by the percentage change in price
B) the percentage change in price by the percentage change in quantity demanded
C) rise by the run
D) the average price by the average quantity demanded

Question 24

If the slope of a demand curve is equal to −0.1,then________.

A) demand is inelastic
B) we do not know whether the demand is elastic or inelastic
C) the demand is elastic at low prices and inelastic at high prices
D) as price increases by 10 per cent, quantity demanded decreases by 1 per cent

Question 25

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded,then the demand for golf balls is ________.

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

Question 26

Figure 4.5
Refer to Figure 4.5.What does the section of the demand curve labelled 'A' represent?

A) The inelastic section of the demand curve
B) The unit-elastic section of the demand curve
C) The elastic section of the demand curve
D) The perfectly elastic section of the demand curve

Question 27

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is _________.

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

Question 28

At a price of $8 per dozen,Chuy sells 40 dozen home-made tamales per week.When he raised his price to $12 per dozen,he still sold 40 dozen per week.Based on this information,the demand for his tamales is _______.

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

Question 29

Consider the following types of demand curves: a.a vertical demand curve
B)a horizontal demand curve
C)a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

A) a only
B) b only
C) a and b only
D) a, b, and c

Question 30

A linear downward-sloping demand curve has price elasticities (in absolute values)that________.

A) increase as price decreases
B) remain constant along the demand curve
C) decrease as price decreases
D) are greater than or equal to 1

Question 31

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then________.

A) aspirin is a normal good
B) the demand for aspirin is inelastic
C) aspirin has few substitutes
D) the demand for aspirin is elastic

Question 32

To what is price elasticity of demand equal?

A) The value of the slope of the demand curve
B) The change in quantity demanded divided by the change in price
C) The percentage change in price divided by the percentage change in quantity demanded
D) The percentage change in quantity demanded divided by the percentage change in price

Question 33

If demand is perfectly elastic,what is the absolute value of the price elasticity coefficient?

A) Infinity
B) Zero
C) More than one
D) Equal to the absolute value of the slope of the demand curve

Question 34

If at a price of $24,Octavia sells 36 homegrown orchids and at $30 she sells 24 homegrown orchids,what is the demand for her orchids?

A) Elastic
B) Inelastic
C) Unit-elastic
D) Perfectly elastic

Question 35

When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent.This indicates that the demand for tortilla chips is _______.

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

Question 36

The slope of a demand curve is not used to measure the price elasticity of demand because _______.

A) the slope of a linear demand curve is not constant
B) the slope of a line cannot have a negative value
C) the measurement of slope is sensitive to the units chosen for price and quantity
D) the slope of the demand curve does not tell us how much quantity changes as price changes

Question 37

At a price of $100,Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125,9 canoes were rented.Using the midpoint formula,what is the absolute value of the price elasticity of demand for canoe rentals?

A) 2
B) 1.25
C) 0.9
D) 0.75

Question 38

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 per cent increase in the price of beef,holding everything else constant,will cause the quantity of beef demanded to________.

A) decrease by 12 per cent
B) decrease by 26 per cent
C) decrease by 32 per cent
D) decrease by 60 per cent

Question 39

If the demand for a life-saving drug was perfectly inelastic and the price doubled,what would happen to the quantity demanded?

A) It would also double.
B) It would decrease by 50 per cent.
C) It would be cut in half.
D) It would remain constant.

Question 40

If the price elasticity of demand for insulin is equal to zero,then what is the demand curve for insulin?

A) Horizontal
B) Downward sloping
C) Curvilinear
D) Vertical

Question 41

Table 4.1
$$\begin{array} { | c | c | } \hline \text { Price (dollars) } & \text { Quantity } \\\hline 35 & 40 \\\hline 25 & 50 \\\hline\end{array}$$

-Refer to Table 4.1.Suppose you own a bookstore.You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35.You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day.Compute the price elasticity of demand using the midpoint formula and these data.Select the correct implication from your work.

A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.
B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered.
C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered.
D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered.

Question 42

If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

Question 43

If at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold,then,using the midpoint formula,the demand for this good is inelastic.

Question 44

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Question 45

If the demand for mobile phone service is inelastic,then________.

A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value)
B) the percentage change in quantity demanded is equal to the percentage change in price
C) the quantity demanded does not change in response to changes in price
D) the percentage change in quantity demanded is less than the percentage change in price (in absolute value)

Question 46

A perfectly elastic demand curve is _______.

A) vertical
B) horizontal
C) curvilinear
D) upward sloping

Question 47

Assume that when the price of cantaloupes is $2.50,the demand for cantaloupes is unit-elastic,and that the demand curve for cantaloupes is linear and downward sloping.If firms lower the price of cantaloupes to $2.00,which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

A) The demand for cantaloupes at $2.00 must be inelastic.
B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price.
C) The demand for cantaloupes at $2.00 must be elastic.
D) The demand for cantaloupes at $2.00 must be unit-elastic.

Question 48

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

A) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock.
B) The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock.
C) The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock.
D) The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.

Question 49

If the demand for iPods is price elastic,then________.

A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value)
B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value)
C) the percentage change in quantity demanded is equal to the percentage change in price
D) quantity demanded is not responsive to changes in price

Question 50

If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

Question 51

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Question 52

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Question 53

Why should we never assume that an inelastic demand curve is a perfectly inelastic demand curve?

A) Because there has never been evidence of a perfectly inelastic demand curve
B) Because an inelastic demand curve may be perfectly inelastic at some times but not others
C) Because perfectly inelastic demand curves are rare
D) Because an inelastic demand curve may be elastic at high prices

Question 54

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50,the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula,what is the price elasticity of demand (in absolute value)over this range?

A) 0.003
B) 0.41
C) 2.43
D) 4

Question 55

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Question 56

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve________.

A) when demand is elastic
B) in special cases when the percentage change in the quantity demanded is equal to the percentage change in price
C) to ensure that the elasticity has a negative value
D) to ensure that we have only one value of the price elasticity of demand between two points on a demand curve

Question 57

Briefly explain the economic concept of elasticity.
__________________________________________________________________________________________________________________________________________________________________________________________

Question 58

Figure 4.6
Refer to Figure 4.6.As price falls from P_A to P_B,the quantity demanded increases most along D_1; therefore,_________.

A) D₁ is unit-elastic
B) D₁ is more inelastic than D₂ or D₃
C) D₁ is more elastic than D₂ or D₃
D) D₁ is elastic at P_A but inelastic at P_B

Question 59

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then________.

A) the price elasticity of demand for teapots is greater than 1 in absolute value
B) the demand for teapots is unit-elastic
C) the price elasticity of demand for teapots is equal to zero
D) the price elasticity of demand for teapots is less than 1 in absolute value

Question 60

If the demand for a steak is unit-elastic,then________.

A) the percentage change in quantity demanded is 1 per cent greater than the percentage change in price
B) the percentage change in quantity demanded is equal to the percentage change in price
C) the percentage change in quantity demanded is 100 per cent greater than the percentage change in price (in absolute value)
D) quantity demanded does not respond to changes in price

Question 61

The larger the share of a good in a consumer's budget,holding everything else constant,the________.

A) more price elastic is a consumer's demand.
B) more vertical is a consumer's demand curve.
C) more price inelastic is a consumer's demand.
D) more unit-elastic is a consumer's demand.

Question 62

Which statement is true of the market for a product that is broadly defined?

A) The good has many complements.
B) There are few substitutes for the product, and the demand for the product is relatively inelastic.
C) There are many substitutes for the product, and the demand for the product is relatively elastic.
D) The expenditure on the good is likely to make up a large share of one's budget.

Question 63

According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at −0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

A) The toothpaste industry is highly competitive.
B) Toothpaste is relatively inexpensive.
C) Toothpaste is heavily endorsed by dentists.
D) There are few close substitutes for toothpaste.

Question 64

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit-elastic?
__________________________________________________________________________________________________________________________________________________________________________________________

Question 65

Which of the following is not a determinant of a good's price elasticity of demand?

A) The slope of the demand curve
B) The share of the good in the consumer's total budget
C) Whether the good is a luxury or a necessity
D) The passage of time

Question 66

The product below which comes closest to having a perfectly inelastic demand is ________.

A) petrol
B) cholesterol medication in general
C) iPhones
D) bus rides

Question 67

With the increased usage of mobile services,what has happened to the price elasticity of demand for landline telephone services?

A) It has become more price inelastic.
B) It has become more price elastic.
C) It has become more income elastic.
D) The absolute value of the price elasticity coefficient has probably gone down.

Question 68

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

A) A wide variety of substitutes are available for the good.
B) The time period under consideration is short.
C) The good is a necessity.
D) The expenditure on the good is small relative to one's budget.

Question 69

The statement which is correct about the price elasticity of demand is:

A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good.
B) The absolute value of the elasticity of demand ranges from zero to one.
C) Demand is more elastic in the long run than it is in the short run.
D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Question 70

What is the demand for petrol in the short run?

A) Elastic because people can easily switch to public transportation
B) Perfectly inelastic because people have no choice but to buy petrol
C) Unit-elastic because people tend to consume a stable amount of petrol per period
D) Inelastic because there are no good substitutes for petrol

Question 71

The demand for all carbonated beverages is likely to be ________ the demand for Pepsi.

A) more elastic than
B) perfectly elastic compared to
C) less elastic than
D) perfectly inelastic compared to

Question 72

What does a demand curve that is horizontal indicate about a commodity?

A) It has few substitutes.
B) It must be very cheap.
C) It is a necessity.
D) It has a large number of substitutes.

Question 73

When there are few close substitutes available for a good,demand tends to be ________.

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

Question 74

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?
__________________________________________________________________________________________________________________________________________________________________________________________

Question 75

Which of the following statements is true?

A) In general, if a product has few substitutes, it will have an elastic demand.
B) The more time that passes, the more inelastic the demand for a product becomes.
C) The demand curve for a necessity is more elastic than the demand curve for a luxury.
D) The more narrowly we define a market, the more elastic the demand for a product will be.

Question 76

The current price of canvas messenger bags is $36 each,and sales of the bags equal 400 per week.If the price elasticity of demand is −2.5 and the price changes to $44,how many messenger bags will be sold per week? Use the midpoint formula.
__________________________________________________________________________________________________________________________________________________________________________________________

Question 77

If the absolute value of the price elasticity of demand for DVD moves is 0.8,then what should be the elasticity of demand for the DVD for the movie The Hangover?

A) Less than 0.8 in absolute value
B) Greater than 0.8 in absolute value
C) Equal to 1 in absolute value
D) Equal to 0 because the DVD of this movie has been out for several years

Question 78

What is the most important determinant of the price elasticity of demand for a good?

A) The definition of the market for a good
B) The availability of substitutes for the good
C) The share of the good in the consumer's budget
D) Whether the good is a necessity or a luxury

Question 79

Which of the following goods would have the most inelastic demand?

A) Ski vacations
B) Bread
C) Luxury cars
D) Big screen TVs

Question 80

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because ________.

A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.
B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change.
C) sales revenue in the building industry will fall sharply.
D) profits will fall by a greater amount in the long run than in the short run.