Deck 4: Elasticity: the Responsiveness of Demand and Supply

Question 1

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.

Answer 1

A

Question 2

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.

Answer 2

D

Question 3

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

Answer 3

C

Question 4

Figure 4-1
Refer to Figure 4-1.A perfectly inelastic demand curve is shown in

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

Question 5

The price elasticity of demand for Stork ice cream is -4.Suppose you're 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 6

Suppose the value of the price elasticity of demand is -3.What does this mean?

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 7

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 8

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.

Question 9

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 10

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 11

Figure 4-1
Refer to Figure 4-1.The demand curve on which elasticity changes at every point is given in

A)Panel A.
B)Panel B.
C)Panel C.
D)none of the above graphs.

Question 12

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

A)one.
B)less than one.
C)greater than one.
D)greater than the absolute value of the slope of the demand curve.

Question 13

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.

Question 14

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 15

Price elasticity of demand measures

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

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 17

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 18

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

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

Question 19

If the percentage increase in price is 15 per cent and the value of the price elasticity of demand is -3,then 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 20

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

A)zero.
B)less than one.
C)more than one.
D)equal to the absolute value of the slope of the demand curve.

Question 21

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 22

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

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

Question 23

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

A)infinity.
B)zero.
C)more than one.
D)equal to the absolute value of the slope of the demand curve.

Question 24

Economists use the concept of ________ 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 25

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 26

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 27

Figure 4-5
Refer to Figure 4-5.The section of the demand curve labeled 'A' represents

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 28

The price elasticity of demand is equal to

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 29

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

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

Question 30

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

A)also double.
B)decrease by 50%.
C)be cut in half.
D)remain constant.

Question 31

At a price of $8 per dozen,Chuy sells 40 dozen homemade 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 32

If the slope of a demand curve is equal to -0.1,then

A)demand is inelastic.
B)we don't 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 33

If at a price of $24,Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids,the demand for her orchids is

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

Question 34

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 35

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 36

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

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

Question 37

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 38

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 39

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 every thing 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 40

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 41

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

Question 42

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 43

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 44

Briefly explain the economic concept of elasticity.

Question 45

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 46

A perfectly elastic demand curve is

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

Question 47

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

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

Question 48

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 49

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 50

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 51

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

Question 52

Table 4-1

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 mid-point 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 53

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 54

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 55

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 56

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 57

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 58

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 59

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

Question 60

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

Question 61

With the increased usage of mobile services,what has happened to the price elasticity of demand for land-line 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 62

If the market for a product is broadly defined,then

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

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 64

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 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 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 67

A demand curve that is horizontal indicates that the commodity

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

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

Which of the following products comes closest to having a perfectly inelastic demand?

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

Question 70

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

A)ski vacations
B)bread
C)luxury cars
D)big screen TVs

Question 71

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

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 72

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 73

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

Question 74

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.

Question 75

The demand for petrol in the short run is

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 76

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

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 77

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 78

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

A)less then 0.8 in absolute value.
B)greater than 0.8 in absolute value.
C)equal to 1 in absolute value.
D)equal to zero because the DVD of this movie has been out for several years.

Question 79

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 80

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.