Question 1

If a household increases its consumption of a good by 10 percent when its income increases by 5 percent, then the good is

Accepted Answer

A)  an inferior good. 
B)  a luxury. 
C)  a necessity. 
D)  both an inferior good and a necessity. 
E)  an unclassified good.

Question 2

If a good is considered to be an inferior good, its income elasticity of demand is

Accepted Answer

A)  greater than 1. 
B)  less than 0. 
C)  equal to 0. 
D)  between 0 and 1. 
E)  equal to 1.

Question 3

Other things being equal, the demand for a product is less elastic if

Accepted Answer

A)  the product has a very small ticket price. 
B)  the product has more substitutes. 
C)  the product has more complements. 
D)  consumers have more time to adjust for any price change. 
E)  the product's cost of production is higher.

Question 4

When price elasticity of demand for a good equals 0, it is said to be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a characteristic of an item with elastic demand?

Accepted Answer

A)  A price that accounts for a small percentage of consumers' incomes 
B)  A short time period under consideration 
C)  A small number of competitors selling the product 
D)  Many substitutes 
E)  A high cost of production

Question 6

If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to ____ by ____ percent.

Accepted Answer

A)  decrease; 25 
B)  increase; 4 
C)  decrease; 1/4 
D)  decrease; 4 
E)  increase; 1/4

Question 7

If the price elasticity of demand for apples is higher than the price elasticity of demand for oranges, then a given percentage increase in the price of apples and oranges will result in more percentage decrease in the quantity demanded for apples than for oranges.

Accepted Answer

A) True 
 B)False

Question 8

For demand to be unit elastic,

Accepted Answer

A)  the percentage change in quantity demanded must be equal to the associated percentage change in price. 
B)  the percentage change in quantity demanded must be less than the associated percentage change in price. 
C)  quantity demanded must change with a change in price. 
D)  demand must change with a change in price. 
E)  the percentage change in quantity demanded must be greater than the associated percentage change in price.

Question 9

If the price of a product increases by 10 percent and the quantity demanded decreases by 15 percent, then the

Accepted Answer

A)  product has an elastic demand. 
B)  product has an inelastic demand. 
C)  product has an elastic supply. 
D)  product has a unit-elastic demand. 
E)  producer should raise the price further to increase total revenue.

Question 10

The price elasticity of supply is a unit-free measure and uses percentage changes in quantity supplied and price to measure how sensitive supply is to a change in price.

Accepted Answer

A) True 
 B)False

Question 11

If supply is perfectly inelastic, then the price elasticity of supply is infinity.

Accepted Answer

A) True 
 B)False

Question 12

The price elasticity of demand is negative because the demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 13

Indicate whether the percentage change in quantity demanded or percentage change in price is greater and whether demand is considered sensitive or insensitive for each of the following categories: elastic, inelastic, unit elastic.

Accepted Answer

The answer of Indicate whether the percentage change in quantity...

Question 14

The cross-price elasticity of demand between two goods measures the percentage change in the demand for one good for a given percentage change in the price of another good.

Accepted Answer

A) True 
 B)False

Question 15

For one to accurately say that the demand for good X is more elastic than the demand for good Y, the price elasticity of demand for good X must be greater than the price elasticity of demand for good Y.

Accepted Answer

A) True 
 B)False

Question 16

The government can issue ration coupons to deal with problems resulting from a price floor.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following formulas is a correct expression of the price elasticity of supply?

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 18

Calculate the price elasticity of demand if a .8 percent change in the price of a product results in a .25 percent change in quantity demanded, and indicate whether demand is elastic, inelastic, or unit elastic.

Accepted Answer

The answer of Calculate the price elasticity of demand if...

Question 19

All of the following are forms or examples of price control except

Accepted Answer

A)  a price ceiling. 
B)  free market interactions. 
C)  the minimum wage. 
D)  rent control. 
E)  a price floor.

Question 20

If the price elasticity of demand for computers is greater than 1, then an increase in computer prices will

Accepted Answer

A)  lower total revenue. 
B)  raise total revenue. 
C)  not change total revenue. 
D)  either raise or lower total revenue, depending on the starting price. 
E)  lead to a higher percentage change in total revenue than the percentage change in price.

Exam 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

If a household increases its consumption of a good by 10 percent when its income increases by 5 percent, then the good is

If a good is considered to be an inferior good, its income elasticity of demand is

Other things being equal, the demand for a product is less elastic if

When price elasticity of demand for a good equals 0, it is said to be perfectly inelastic.

Which of the following is a characteristic of an item with elastic demand?

If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to by percent.

If the price elasticity of demand for apples is higher than the price elasticity of demand for oranges, then a given percentage increase in the price of apples and oranges will result in more percentage decrease in the quantity demanded for apples than for oranges.

For demand to be unit elastic,

If the price of a product increases by 10 percent and the quantity demanded decreases by 15 percent, then the

The price elasticity of supply is a unit-free measure and uses percentage changes in quantity supplied and price to measure how sensitive supply is to a change in price.

If supply is perfectly inelastic, then the price elasticity of supply is infinity.

The price elasticity of demand is negative because the demand curve slopes downward.

Indicate whether the percentage change in quantity demanded or percentage change in price is greater and whether demand is considered sensitive or insensitive for each of the following categories: elastic, inelastic, unit elastic.

The cross-price elasticity of demand between two goods measures the percentage change in the demand for one good for a given percentage change in the price of another good.

For one to accurately say that the demand for good X is more elastic than the demand for good Y, the price elasticity of demand for good X must be greater than the price elasticity of demand for good Y.

The government can issue ration coupons to deal with problems resulting from a price floor.

Which of the following formulas is a correct expression of the price elasticity of supply?

Calculate the price elasticity of demand if a .8 percent change in the price of a product results in a .25 percent change in quantity demanded, and indicate whether demand is elastic, inelastic, or unit elastic.

All of the following are forms or examples of price control except

If the price elasticity of demand for computers is greater than 1, then an increase in computer prices will