Question 1

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

Accepted Answer

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 2

Refer to the following graphs to answer the questions that follow:

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

Accepted Answer

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

Question 3

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

Accepted Answer

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

Question 4

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10%,what is the percentage change in the quantity consumed?

Accepted Answer

A) -0.5% 
B) -5% 
C) 50% 
D) 0.5% 
E) 2%

Question 5

We would expect to see a positive cross-price elasticity between:

Accepted Answer

A) peanut butter and jelly. 
B) ice cream and frozen yogurt. 
C) basketballs and steak. 
D) sneakers and socks. 
E) computers and iPods.

Question 6

Toyota uses a just-in-time production method to respond to consumer demand for its vehicles.In essence,it relies on various cues to signal when new vehicles should be made rather than stocking inventory.This allows Toyota to respond very quickly to changes in consumer demand.Explain whether this system makes elasticity of supply relatively price elastic or price inelastic.

Accepted Answer

The answer of Toyota uses a just-in-time production method to...

Question 7

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%,what is the percentage change in the price of Good A?

Accepted Answer

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

Question 8

If the owner of Sally's Salty Treats finds that,in the long run,she can trade one type of input for another,the price elasticity of supply is:

Accepted Answer

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

Question 9

Cross-price elasticity measures the relationship between:

Accepted Answer

A) normal goods and inferior goods. 
B) complements and inferior goods. 
C) necessities and luxuries. 
D) two goods and services. 
E) income and substitute goods.

Question 10

Demand for which of the following goods/services is likely to be the LEAST elastic in a Minnesota winter?

Accepted Answer

A) a blue hooded sweatshirt with fur-lined pockets 
B) a blue hooded sweatshirt 
C) a hooded crew-neck sweatshirt 
D) a blue sweatshirt 
E) a sweatshirt

Question 11

How does the price elasticity of demand at relatively high prices compare to the price elasticity of demand at relatively low prices? Calculate the price elasticity from $5 to $6 and the price elasticity from $1 to $2 in the accompanying graph.

Accepted Answer

The answer of How does the price elasticity of demand...

Question 12

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

Accepted Answer

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 13

If the cross-price elasticity of demand between Good A and Good B is 3,the price of Good B increases,and the price elasticity of demand for Good B is inelastic,we can expect to see a(n)________ change in the quantity demanded for Good A.

Accepted Answer

A) zero 
B) small 
C) infinite 
D) one-for-one 
E) large

Question 14

Graph and explain the appropriate shape of the supply or demand curve for Jimmy's Jammin Jelly Beans when:
a.there is a hurricane that destroys most sugarcane fields.
b.a new candy vendor opens a shop in town.
c.Jimmy's Jammin Jelly Beans become the hottest item to have at parties.

Accepted Answer

The answer of Graph and explain the appropriate shape of...

Question 15

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

Accepted Answer

A) purses and backpacks 
B) sofas and dining room tables 
C) manicures and pedicures 
D) shoes and socks 
E) trucks and sedans

Question 16

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

Accepted Answer

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

Question 17

Over time,the price elasticity of supply for sunglasses will become more:

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

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

Accepted Answer

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

Question 20

Super Economy Brand products have an income elasticity of -1.4.Thus,these are __________ goods.

Accepted Answer

A) necessity 
B) inferior 
C) luxury 
D) normal 
E) complementary

Exam 4: Elasticity

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

Refer to the following graphs to answer the questions that follow: -Which of these graphs most likely depicts a price elasticity of demand of -0.2?