Deck 6: Elasticities

Question 1

A perfectly inelastic supply curve is vertical.

Answer 1

True

Question 2

Price elasticity of demand is a measure of the relative responsiveness of the change in quantity demanded to a change in price.

Answer 2

True

Question 3

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Answer 3

False

Question 4

Demand tends to be more elastic, the greater the number of good substitutes, the greater the fraction of one's income devoted to a product and the greater the time allowed to respond to a price change.

Question 5

If a huge percentage change in price leads to a small percentage change in quantity demanded, then demand is said to be inelastic.

Question 6

If the price elasticity coefficient equals 4.2, then demand is relatively inelastic with regard to price.

Question 7

A perfectly elastic demand curve is vertical.

Question 8

The quantity of gasoline demanded will respond more to a change in price over three weeks than over three years.

Question 9

Using the midpoint method for calculating the price elasticity of demand, you get the same elasticity of demand between two points, whether you are moving up the demand curve or down it.

Question 10

Demand is relatively elastic when the price elasticity coefficient exceeds 1.0.

Question 11

The widespread availability of e-mail has likely increased the price elasticity of demand for the services of the U.S. Postal Service.

Question 12

The flatter the demand curve passing through a given point, the less elastic the demand curve at that point.

Question 13

If Pizza Hut decreases its price for a large pizza by 25% and this leads to a 75% increase in sales, we can conclude that demand is relatively elastic with regard to price over that range.

Question 14

If good A had twice as many good substitutes as good B, but good B consumed twice the amount of a buyers income as good A, goods A and B would have the same elasticity of demand.

Question 15

If the demand curve for X has twice the elasticity of the demand curve for Y, then for the same percentage decrease in price, the percentage increase in the quantity of X demanded would be twice that for Y.

Question 16

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Question 17

Moving along an elastic portion of a demand curve, a small percentage change in price leads to a larger percentage change in quantity demanded.

Question 18

Price elasticity of demand is a measure of the relative responsiveness of the change in price to a change in quantity demanded.​

Question 19

If a huge percentage change in price leads to a small percentage change in quantity demanded, then demand is said to be elastic.

Question 20

Moving along the inelastic portion of a demand curve, a large percentage change in price leads to a smaller percentage change in quantity demanded.

Question 21

An increase in tax rates on a product will raise more revenue, the more inelastic is the demand curve.

Question 22

Price elasticity of supply is a measure of the relative responsiveness of the change in price to a change in quantity supplied.

Question 23

As you move down a demand curve, if a decrease in price from $11 to $9 increased total revenue, then further decreases below $9 would also increase total revenue.

Question 24

A straight line demand curve has a different elasticity of demand at different points along the curve.

Question 25

When a 9% increase in price leads to a 6% increase in quantity supplied, supply is relatively inelastic.

Question 26

A decrease in price will cause a firm's total revenue to decrease if demand is price inelastic.

Question 27

The longer the time buyers have to respond to a decrease in price, the more likely it is that the total revenue for the good in question would increase as a result.

Question 28

If you and your business partner are trying to increase your total revenue, and you want a lower price than she does, it could be because you think the relevant demand curve is more elastic than your partner does.

Question 29

Price elasticity of demand is defined as:

A)​the slope of the demand curve.
B)​the slope of the demand curve divided by the 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 30

To assess whether or not a good is normal or inferior, economists are interested in the cross price elasticity of demand.

Question 31

If demand for lima beans is inelastic, a poor lima bean harvest could increase the total revenue of lima bean producers.

Question 32

If the cross price elasticity of demand between goods A and B was equal to 0.5, those goods are substitutes.

Question 33

Given an upward sloping supply curve, the more inelastic is demand, the greater the fraction of the burden of taxation that is borne by consumers.

Question 34

If the income elasticity of demand is less than 1.0, it means it is an inferior good.

Question 35

The more good substitutes there are for a product, the more likely it is that the total revenue for the good in question would increase as a result of an increase in price.

Question 36

To determine whether or not a pair of goods are complements, economists are interested in the cross price elasticity of demand between the two goods.

Question 37

When a 5% increase in price leads to an 8% increase in quantity supplied, supply is relatively inelastic.

Question 38

If a consumer's total expenditure on a good does not vary with price, then that consumer's demand curve is unit elastic over that range of prices.

Question 39

Unlike demand, the longer the time suppliers have to respond to a change in price, the less elastic is the supply curve.

Question 40

An increase in price will cause a firm's total revenue to increase if demand is price elastic.

Question 41

A steel mill raises the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is:

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

Question 42

Shaina and Mariah have a business that provides personal fitness training services. They know that after raising their prices from $100 to $150 per hour, the quantity of hours they spent delivering training services fell from 45 to 40 hours per week. The demand for their services is:

A)​elastic, with a price elasticity coefficient greater than one.
B)​elastic, with a price elasticity coefficient less than one.
C)​inelastic, with a price elasticity coefficient greater than one.
D)​inelastic, with a price elasticity coefficient less than one.

Question 43

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

A)​independent
B)​inelastic
C)​unit elastic
D)​elastic

Question 44

Shaina and Mariah have a business that provides personal fitness training services. They know that after raising their prices from $50 to $75 per hour, the quantity of hours they spent delivering training services fell from 90 to 80 hours per week. The demand for their services is:

A)​inelastic, with a price elasticity coefficient greater than one.
B)​inelastic, with a price elasticity coefficient less than one.
C)​elastic, with a price elasticity coefficient greater than one.
D)​elastic, with a price elasticity coefficient less than one.

Question 45

Butch's Barber Shop knows that it faces an elasticity of demand equal to 3.0 over the relevant range of its demand curve. A 1% increase in its price will do what to the number of haircuts demanded from Butch's Barber Shop?

A)​It will increase by 0.33%
B)​It will increase by 3.0%
C)​It will decrease by 0.33%
D)​It will decrease by 3.0%

Question 46

If the demand for a good is perfectly inelastic, what will happen to the quantity demanded if there is a tiny increase in price?

A)​quantity demanded will increase proportionately
B)​quantity demanded will fall to zero
C)​quantity demanded will decrease proportionately
D)​quantity demanded will remain the same

Question 47

If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

A)​quantity demanded will increase proportionately
B)​quantity demanded will fall to zero
C)​quantity demanded will register a disproportionately high increase
D)​quantity demanded will decrease proportionately

Question 48

When demand is elastic:

A)​price elasticity of demand is greater than one.
B)​consumers are relatively responsive to changes in price.
C)​the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price.
D)​all of the above are correct.

Question 49

The Shoe Emporium reduces the price of its shoes by 50% and finds that the quantity demanded for its shoes increases more than 80%. The demand for shoes from The Shoe Emporium appears to be:

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

Question 50

A movie theatre raises its admission prices by 10%, which results in a 10% reduction in the quantity of tickets demanded. The demand curve facing this firm is:

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

Question 51

If the demand curve is perfectly elastic, the elasticity coefficient is ____ and the curve is ____.

A)​zero, vertical
B)​infinity, horizontal
C)​zero, horizontal
D)​infinity, vertical

Question 52

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold. What is the elasticity of demand facing Fantastic Cuts?

A)​0.05
B)​0.10
C)​0.33
D)​3.0

Question 53

If the price elasticity of demand for a good is 5.0, then a 10 percent increase in price results in a

A)​0.5 percent decrease in the quantity demanded.
B)​2.5 percent decrease in the quantity demanded.
C)​5 percent decrease in the quantity demanded.
D)​50 percent decrease in the quantity demanded.

Question 54

If makers of snake anti-venom implement significant price increases, it is unlikely to significantly affect the use of anti-venom for treating poisonous snakebites. The demand for anti-venom is:

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

Question 55

Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Bailey's Barber Shop?

A)​0.05
B)​0.10
C)​0.33
D)​3.0

Question 56

Demand is said to be ____ when the quantity demanded changes the same proportion as the price.

A)​independent
B)​inelastic
C)​unit elastic
D)​elastic

Question 57

When the Blue Ocean Surfboard Company lowered the price of surfboards by 20%, it sold 10% more surfboards. The price elasticity of demand for surfboards is:

A)​2.
B)​1/2.
C)​1.
D)​20.

Question 58

Shari and Mary have a business that provides personal fitness training services. They know that after raising their prices from $40 to $60 per hour, the quantity of hours they spent delivering training services fell from 90 to 50 hours per week. The demand for their services is:

A)​inelastic, with a price elasticity coefficient greater than one.
B)​inelastic, with a price elasticity coefficient less than one.
C)​elastic, with a price elasticity coefficient greater than one.
D)​elastic, with a price elasticity coefficient less than one.

Question 59

A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is:

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

Question 60

Total revenue for a seller represents the amount that:

A)​sellers receive for a good or service which is computed as P ÷ Q.
B)​sellers receive for a good or service which is computed as P Q.
C)​one buyer spends on a good or service which is computed as P Q.
D)​one buyer spends on a good or service which is computed as P ÷ Q.

Question 61

Suppose the demand for a good is currently unit elastic over the relevant range. Then a new substitute good is introduced to the market. As a result, demand over that range is now likely to be

A)​Unit elastic.
B)​Relatively elastic.
C)​Relatively inelastic.
D)​Perfectly elastic.

Question 62

If the short run elasticity of demand for widgets is 0.7 and the long run elasticity of demand for widgets is 1.5, an increase in price will ____ total revenue in the short run and ____ total revenue in the long run.

A)​Increase; increase.
B)​Increase; decrease.
C)​Decrease; increase.
D)​Decrease; decrease.

Question 63

If a cut in prices increases total revenue in the short run, what will it do to total revenue in the long run?

A)​It will decrease total revenue in the long run.
B)​It will increase total revenue in the long run.
C)​It will leave total revenue unchanged in the long run.
D)​Any of the above results are possible in the long run.

Question 64

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It lowered prices 10% and found that the number of customers rose by almost 50%. This means:

A)​the demand curve for the premium movie channels shifted to the right.
B)​the supply curve for premium movie channels shifted to the left.
C)​the demand for premium movie channels is elastic in this price range.
D)​the demand for premium movie channels is inelastic in this price range.

Question 65

If a small change in price will lead to an infinite change in the quantity demanded, then the demand curve is:

A)​horizontal.
B)​vertical.
C)​inclined.
D)​non-linear.

Question 66

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It increased prices from $20 to $30 per month and found virtually no change in the number of customers. This means:

A)​the demand curve for the premium movie channels shifted to the right.
B)​the supply curve for premium movie channels shifted to the left.
C)​the demand for premium movie channels is very elastic in this price range.
D)​the demand for premium movie channels is very inelastic in this price range.

Question 67

If an increase in prices decreases total revenue in the short run, what will it do to total revenue in the long run?

A)​It will decrease total revenue in the long run.
B)​It will increase total revenue in the long run.
C)​It will leave total revenue unchanged in the long run.
D)​Any of the above results are possible in the long run.

Question 68

Suppose a 5 percent increase in price causes a 25 percent decrease in quantity demanded. Which of the following statements is most likely true?

A)​There are many substitutes for this good.
B)​There are few substitutes for this good.
C)​The market for the good is a necessity.
D)​The price change persists over a very short period of time.

Question 69

If the short run elasticity of demand for widgets is 0.4 and the long run elasticity of demand for widgets is 0.95, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

A)​Increase; increase.
B)​Increase; decrease.
C)​Decrease; increase.
D)​Decrease; decrease.

Question 70

If the short run elasticity of demand for widgets is 0.7 and the long run elasticity of demand for widgets is 1.5, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

A)​Increase; increase.
B)​Increase; decrease.
C)​Decrease; increase.
D)​Decrease; decrease.

Question 71

If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, an increase in price will ____ total revenue in the short run and ____ total revenue in the long run.

A)​Increase; increase.
B)​Increase; decrease.
C)​Decrease; increase.
D)​Decrease; decrease.

Question 72

The nation's largest cable TV company tested the effect of a price increase for premium sports channels. It increased prices 10% and found that the number of customers decreased by more than 40%. This means:

A)​the demand curve for the premium sports channels shifted to the right.
B)​the supply curve for premium sports channels shifted to the left.
C)​the demand for premium sports channels is elastic in this price range.
D)​the demand for premium sports channels is inelastic in this price range.

Question 73

Suppose the demand for a good is currently unit elastic over the relevant range. Then the producer of a substitute good goes out of business and stops producing it. As a result, demand over that range is now likely to be

A)​Unit elastic.
B)​Relatively elastic.
C)​Relatively inelastic.
D)​Perfectly inelastic.

Question 74

If a small change in price will lead to an infinite change in the quantity demanded, then the demand curve is:

A)​Perfectly elastic.
B)​Perfectly inelastic.
C)​Downward sloping.
D)​non-linear

Question 75

Suppose there is a 10 percent increase in the price of good X and it causes a 10 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

A)​0.
B)​1.
C)​10.
D)​100.

Question 76

If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a

A)​0.0625 percent increase in the quantity demanded.
B)​4 percent increase in the quantity demanded.
C)​5 percent increase in the quantity demanded.
D)​80 percent increase in the quantity demanded.

Question 77

If a cut in prices decreases total revenue in the short run, what will it do to total revenue in the long run?

A)​It will decrease total revenue in the long run.
B)​It will increase total revenue in the long run.
C)​It will leave total revenue unchanged in the long run.
D)​Any of the above results are possible in the long run.

Question 78

If an increase prices increases total revenue in the short run, what will it do to total revenue in the long run?

A)​It will decrease total revenue in the long run.
B)​It will increase total revenue in the long run.
C)​It will leave total revenue unchanged in the long run.
D)​Any of the above results are possible in the long run.

Question 79

If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

A)​Increase; increase.
B)​Increase; decrease.
C)​Decrease; increase.
D)​Decrease; decrease.

Question 80

If the short run elasticity of demand for widgets is 0.4 and the long run elasticity of demand for widgets is 0.95, an increase in price will ____ total revenue in the short run and ____ total revenue in the long run.

A)​Increase; increase.
B)​Increase; decrease.
C)​Decrease; increase.
D)​Decrease; decrease.