Question 1

The quantity of raspberries sold at a local store increases from 100 pints to 1,500 pints when the price is reduced from $4.00 to $1.00. In this situation, the absolute price elasticity of demand for raspberries is approximately

Accepted Answer

A) 0.69. 
B) 6.7. 
C) 1.46. 
D) 4.3.

Question 2

If the quantity supplied of candy increases by 10% when the price of candy increases by 20%, which of the following is true?

Accepted Answer

A) Supply for candy is elastic, and price elasticity of supply = 2.0. 
B) Supply for candy is inelastic, and price elasticity of supply = 2.0. 
C) Supply for candy is elastic, and price elasticity of supply = 0.5. 
D) Supply for candy is inelastic, and price elasticity of supply = 0.5.

Question 3

Which of the following is more likely to have perfectly elastic or nearly perfectly elastic demand?

Accepted Answer

A) a textbook required for an economics course 
B) the guitar produced by a master craftsman 
C) milk produced by a Wisconsin dairy farmer 
D) the services offered by the only allergist in the community

Question 4

Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true?

Accepted Answer

A) Peanut butter is a normal good, because income elasticity is positive. 
B) Peanut butter is an inferior good, because income elasticity is positive. 
C) Peanut butter is a normal good, because income elasticity is less than 1. 
D) Peanut butter is an inferior good, because income elasticity is less than 1.

Question 5

Graphically, what is the main difference between the measure of income elasticity of demand as opposed to the measure of price elasticity of demand?

Accepted Answer

The answer of Graphically, what is the main difference between...

Question 6

If the price of oil goes up by 50 % and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is

Accepted Answer

A) 0.25. 
B) 0.50. 
C) 0.75. 
D) 1.00.

Question 7

If there is no response in quantity demanded to a change in price, demand is

Accepted Answer

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

Question 8

When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals ________.

Accepted Answer

A) 0.45 
B) 0.40 
C) 2.20 
D) 2.50

Question 9

A 2 percent rise in the price of a good leads to a 2 percent decrease in quantity demanded. The absolute price elasticity of demand is

Accepted Answer

A) 5. 
B) 10. 
C) 0.1. 
D) 1.0.

Question 10

A firm could lower prices and still increase revenue if

Accepted Answer

A) demand is elastic. 
B) elasticity of demand is equal to unity. 
C) demand is inelastic. 
D) elasticity of demand is equal to zero.

Question 11

If the cross price elasticity of demand between two commodities is positive, then these commodities are

Accepted Answer

A) are superior. 
B) are complements. 
C) are substitutes. 
D) are inferior.

Question 12

If the price elasticity of supply is equal to 1, we would say the supply of the item is

Accepted Answer

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

Question 13

Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is

Accepted Answer

A) 0.69. 
B) 1.45. 
C) 1.00. 
D) infinity.

Question 14

A good's price elasticity of demand can be calculated by using the formula of

Accepted Answer

A) percentage change in price divided by percentage change in quantity demanded. 
B) percentage change in quantity demanded divided by percentage change in price. 
C) percentage change in price divided by percentage change in income. 
D) absolute change in quantity demanded divided by absolute change in price.

Question 15

If the supply curve is vertical, then supply is

Accepted Answer

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

Question 16

Suppose that when the price of milk rises 20%, the quantity demanded of milk falls 10%. Based on this information, what is the approximate absolute price elasticity of demand for milk?

Accepted Answer

A) 0.05 
B) 0.2 
C) 0.5 
D) 2.0

Question 17

When demand is unit elastic, a change in price will cause

Accepted Answer

A) a change in total revenue in the same direction. 
B) a change in total revenue in the opposite direction. 
C) no change in total revenue. 
D) a change in total revenue in either direction depending on whether the price is increasing or decreasing.

Question 18

Suppose two goods are perfect substitutes. The price elasticity of demand of one of the goods is

Accepted Answer

A) 0. 
B) 1. 
C) 1000. 
D) infinity.

Question 19

If the absolute price elasticity of demand for a product is less than 1, then

Accepted Answer

A) the absolute price elasticity of demand is inelastic and consumers are relatively insensitive to price changes. 
B) the absolute price elasticity of demand is inelastic and consumers are relatively sensitive to price changes. 
C) the absolute price elasticity of demand is elastic and consumers are relatively insensitive to price changes. 
D) the absolute price elasticity of demand is elastic and consumers are relatively sensitive to price changes.

Question 20

The range to the right of the midpoint on a linear demand curve is

Accepted Answer

A) elastic. 
B) infinite. 
C) one. 
D) inelastic.

Exam 19: Demand and Supply Elasticity