Question 1

The demand for rare butterflies tends to be income:

Accepted Answer

A)  elastic because they are relatively expensive 
B)  inelastic because butterflies are small animals 
C)  elastic because most buyers feel that they can do without it 
D)  inelastic because butterflies are difficult to breed

Question 2

The development of a new, more productive hybrid wheat would tend to decrease the total revenue of wheat farmers because:

Accepted Answer

A)  the demand for wheat tends to be elastic 
B)  the supply of wheat tends to be elastic 
C)  the demand for wheat tends to be inelastic 
D)  the supply of wheat tends to be inelastic

Question 3

Suppose the price of product X is increased from $8.00 to $10.00 and as a result, the quantity of X demanded decreases from 1500 to 1000. Using the midpoint method, the price elasticity of demand for X in the given price range is:

Accepted Answer

A)  2.00 
B)  1.80 
C)  1.00 
D)  0.40

Question 4

In which of the following cases will total revenue increase?

Accepted Answer

A)  price falls and demand is inelastic 
B)  price falls and supply is elastic 
C)  price rises and demand is inelastic 
D)  price rises and demand is elastic

Question 5

If sellers respond substantially to changes in the price, then:

Accepted Answer

A)  sellers are considered to be relatively price sensitive 
B)  sellers are considered to be relatively price insensitive 
C)  the supply curve will shift substantially when the price rises 
D)  the price elasticity of supply equals one

Question 6

Graph 5-4
 
-Refer to Graph 5-4. Total revenue at P2 would be represented by area(s):

Accepted Answer

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

Question 7

Rate the supply curves on the graph shown from shortest time frame to longest time frame. Which curve is the most inelastic? Which curve is the most elastic?

Accepted Answer

The answer of Rate the supply curves on the graph...

Question 8

Slope is the ratio of the changes in two variables, while elasticity is the ratio of the percentage changes in two variables.

Accepted Answer

A) True 
 B)False

Question 9

If two demand curves with different slopes pass through the same point, which demand curve will have the greater price elasticity of demand if the price falls from that point?

Accepted Answer

The answer of If two demand curves with different slopes...

Question 10

How does total revenue change as one moves down a linear demand curve?

Accepted Answer

A)  it increases 
B)  it decreases 
C)  it first increases, then decreases 
D)  it is unaffected by a movement along the demand curve

Question 11

When Anna was studying at university, she had a monthly income of $900 and bought 4 items of second-hand clothing. Now, she is working full-time with a monthly income of $3000. She now buys 20 items of second-hand clothing a month. Compute Anna's income elasticity of demand using the midpoint method. What type of goods are second-hand clothes for Anna?

Accepted Answer

The answer of When Anna was studying at university, she...

Question 12

Assume that a four per cent decrease in income results in a two per cent increase in the quantity demanded of a good. The income elasticity of demand for the good is:

Accepted Answer

A)  negative and therefore the good is an inferior good 
B)  negative and therefore the good is a normal good 
C)  positive and therefore the good is an inferior good 
D)  positive and therefore the good is a normal good

Question 13

If an increase in the price of a good results in an increase in total revenue for the firm, then:

Accepted Answer

A)  the supply of the good must be unit elastic 
B)  the supply of the good must be inelastic 
C)  the supply of the good must be elastic 
D)  nothing can be said about price elasticity of supply from the information given

Question 14

What is elasticity and why do economists use the concept?

Accepted Answer

The answer of What is elasticity and why do economists...

Question 15

Table 5-2
Quantities purchased
 
-Refer to Table 5-2. Using the midpoint method, what is the income elasticity of good Y?

Accepted Answer

A)  -0.75 
B)  0.75 
C)  -1.33 
D)  0

Question 16

Suppose that there are many substitutes for crocodile-leather handbags. This would mean that the:

Accepted Answer

A)  demand for crocodile-leather handbags would tend to be income inelastic 
B)  demand for crocodile-leather handbags would tend to be price elastic 
C)  demand for crocodile-leather handbags would tend to be price inelastic 
D)  demand for crocodile-leather handbags would tend to be income elastic

Question 17

The price elasticity of demand for a product will tend to be higher if fewer good substitutes for it are available.

Accepted Answer

A) True 
 B)False

Question 18

Table 5-1
Suppose a coffee shop faces the following demand schedule for coffee.
 
-Referring to Table 5-1, if the shop increases the price from $3.00 to $4.00, the price elasticity of demand will (according to the mid-point method) be:

Accepted Answer

A)  0.29 and inelastic 
B)  0.29 and elastic 
C)  3.5 and inelastic 
D)  3.5 and elastic

Question 19

Last year, Joan bought 50 kg of hamburger mince when the household income was $40 000. This year, the household income was only $30 000 and Joan bought 60 kg of hamburger mince. All else being constant, Joan's income elasticity of demand for hamburger mince is:

Accepted Answer

A)  positive, so Joan considers hamburger to be an inferior good 
B)  positive, so Joan considers hamburger to be a normal good and a necessity 
C)  negative, so Joan considers hamburger mince to be an inferior good 
D)  negative, so Joan considers hamburger mince to be a normal good

Question 20

Table 5-1
Suppose a coffee shop faces the following demand schedule for coffee.
 
-Refer to Table 5-1. Notice that if the price is lowered from $2.00 to $1.50, total revenue falls from $2000 to $1800. This means that over this price range, the demand for coffee must be:

Accepted Answer

A)  price elastic 
B)  price inelastic 
C)  price unit elastic 
D)  income elastic

Exam 5: Elasticity and Its Application

The demand for rare butterflies tends to be income:

The development of a new, more productive hybrid wheat would tend to decrease the total revenue of wheat farmers because:

Suppose the price of product X is increased from $8.00 to $10.00 and as a result, the quantity of X demanded decreases from 1500 to 1000. Using the midpoint method, the price elasticity of demand for X in the given price range is:

In which of the following cases will total revenue increase?

If sellers respond substantially to changes in the price, then:

Graph 5-4 -Refer to Graph 5-4. Total revenue at P₂ would be represented by area(s) :

Rate the supply curves on the graph shown from shortest time frame to longest time frame. Which curve is the most inelastic? Which curve is the most elastic?

Slope is the ratio of the changes in two variables, while elasticity is the ratio of the percentage changes in two variables.

If two demand curves with different slopes pass through the same point, which demand curve will have the greater price elasticity of demand if the price falls from that point?

How does total revenue change as one moves down a linear demand curve?

Assume that a four per cent decrease in income results in a two per cent increase in the quantity demanded of a good. The income elasticity of demand for the good is:

If an increase in the price of a good results in an increase in total revenue for the firm, then:

What is elasticity and why do economists use the concept?

Table 5-2 Quantities purchased -Refer to Table 5-2. Using the midpoint method, what is the income elasticity of good Y?

Suppose that there are many substitutes for crocodile-leather handbags. This would mean that the:

The price elasticity of demand for a product will tend to be higher if fewer good substitutes for it are available.

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -Referring to Table 5-1, if the shop increases the price from $3.00 to $4.00, the price elasticity of demand will (according to the mid-point method) be:

Last year, Joan bought 50 kg of hamburger mince when the household income was $40 000. This year, the household income was only $30 000 and Joan bought 60 kg of hamburger mince. All else being constant, Joan's income elasticity of demand for hamburger mince is:

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -Refer to Table 5-1. Notice that if the price is lowered from $2.00 to $1.50, total revenue falls from $2000 to $1800. This means that over this price range, the demand for coffee must be:

Exam 5: Elasticity and Its Application

The demand for rare butterflies tends to be income:

The development of a new, more productive hybrid wheat would tend to decrease the total revenue of wheat farmers because:

Suppose the price of product X is increased from $8.00 to $10.00 and as a result, the quantity of X demanded decreases from 1500 to 1000. Using the midpoint method, the price elasticity of demand for X in the given price range is:

In which of the following cases will total revenue increase?

If sellers respond substantially to changes in the price, then:

Graph 5-4 -Refer to Graph 5-4. Total revenue at P2 would be represented by area(s) :

Rate the supply curves on the graph shown from shortest time frame to longest time frame. Which curve is the most inelastic? Which curve is the most elastic?

Slope is the ratio of the changes in two variables, while elasticity is the ratio of the percentage changes in two variables.

If two demand curves with different slopes pass through the same point, which demand curve will have the greater price elasticity of demand if the price falls from that point?

How does total revenue change as one moves down a linear demand curve?

Assume that a four per cent decrease in income results in a two per cent increase in the quantity demanded of a good. The income elasticity of demand for the good is:

If an increase in the price of a good results in an increase in total revenue for the firm, then:

What is elasticity and why do economists use the concept?

Table 5-2 Quantities purchased -Refer to Table 5-2. Using the midpoint method, what is the income elasticity of good Y?

Suppose that there are many substitutes for crocodile-leather handbags. This would mean that the:

The price elasticity of demand for a product will tend to be higher if fewer good substitutes for it are available.

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -Referring to Table 5-1, if the shop increases the price from $3.00 to $4.00, the price elasticity of demand will (according to the mid-point method) be:

Last year, Joan bought 50 kg of hamburger mince when the household income was $40 000. This year, the household income was only $30 000 and Joan bought 60 kg of hamburger mince. All else being constant, Joan's income elasticity of demand for hamburger mince is:

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -Refer to Table 5-1. Notice that if the price is lowered from $2.00 to $1.50, total revenue falls from $2000 to $1800. This means that over this price range, the demand for coffee must be:

Graph 5-4 -Refer to Graph 5-4. Total revenue at P₂ would be represented by area(s) :