Question 1

Price elasticity of demand is the responsiveness of

Accepted Answer

A) the quantity demanded to a change in price. 
B) demand to a change in supply. 
C) demand to a change in income. 
D) demand for a good to a change in the demand for another good.

Question 2

If a good has an absolute price elasticity of 1, the demand for the good is

Accepted Answer

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

Question 3

-For a linear demand curve, where is the amount of total expenditures on a good maximized?

Accepted Answer

The answer of 
-For a linear demand curve, where is...

Question 4

If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week, the absolute value of price elasticity of demand in that price range is approximately

Accepted Answer

A) 0.23. 
B) 4.35. 
C) 0.93. 
D) 2.34.

Question 5

Suppose that the absolute price elasticity of demand for hamburger is 1.15 and that the absolute price elasticity of demand for steak is 2.4. Then the absolute price elasticity of demand for beef will be

Accepted Answer

A) less than 1.15. 
B) more than 2.4. 
C) between 1.15 and 2.4. 
D) equal to 1.15.

Question 6

-Refer to the above table. Demand is least price elastic at a price of

Accepted Answer

A) $10.00. 
B) $7.50. 
C) $7.00. 
D) $5.00.

Question 7

Suppose that the cross price elasticity of demand between goods A and B equals 1.5. Which of the following is TRUE?

Accepted Answer

A) A and B are complements because the cross price elasticity is greater than one. 
B) A and B are complements because the cross price elasticity is positive. 
C) A and B are substitutes because the cross price elasticity is greater than one. 
D) A and B are substitutes because the cross price elasticity is positive.

Question 8

A perfectly elastic demand curve exhibits

Accepted Answer

A) zero responsiveness to changes in price. 
B) that quantity demanded will decrease to zero when there is a slight increase in the price level. 
C) a change in quantity demanded that is proportional to the change in price. 
D) a change in quantity demanded that is always twenty percent of the change in price.

Question 9

When total revenue remain unchanged when there is a change in price, demand is

Accepted Answer

A) unit-elastic. 
B) inelastic. 
C) elastic. 
D) not related.

Question 10

The income elasticity of demand is

Accepted Answer

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

Question 11

The price elasticity of supply is higher when

Accepted Answer

A) the number of buyers in the market decreases. 
B) the product in question is an inferior good. 
C) the number of buyers in the market increases. 
D) producers have more time to adjust to price changes.

Question 12

Even though price elasticity of demand is always ________, by convention its absolute value is always discussed as a ________.

Accepted Answer

A) negative; prime number 
B) positive; negative number 
C) a fraction; whole number 
D) negative; positive number

Question 13

-Use the above figure. Which graph depicts a normal good?

Accepted Answer

A) A 
B) B 
C) C 
D) D

Question 14

The absolute price elasticity of demand for a vertical demand curve

Accepted Answer

A) is infinite. 
B) is 1.0. 
C) is 0. 
D) depends on where one is on the demand curve.

Question 15

An inferior good has an income elasticity of demand that is

Accepted Answer

A) positive. 
B) negative. 
C) positive but less than 1. 
D) zero.

Question 16

When the price of a pound of apples is $1.00, 7500 pounds of apples are demanded. When the price of a pound of apples decreases to $0.80, 10,000 pounds of apples are demanded. In this price range the demand for apples is

Accepted Answer

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

Question 17

A measure of the responsiveness of demand to changes in income, all other things being constant, is

Accepted Answer

A) income elasticity of demand. 
B) price income elasticity of demand. 
C) price elasticity of demand. 
D) cross price elasticity of demand.

Question 18

"Price elasticity measures how many more units of a good that consumers will buy given a decrease in price." Do you agree or disagree? Explain.

Accepted Answer

The answer of "Price elasticity measures how many more units...

Question 19

-In the above table, the cross price elasticity of demand for good X with good Y when PY falls from $20 to $18 is

Accepted Answer

A) -2. 
B) 0. 
C) +1. 
D) -1.

Question 20

If demand for a good is perfectly inelastic, then

Accepted Answer

A) a price increase would cause a fall in quantity demanded. 
B) a price increase would cause no change in quantity demanded. 
C) a price increase would cause an increase in quantity demanded. 
D) a price increase would cause a fall in total revenue.

Exam 19: Demand and Supply Elasticity