Question 1

If a 5 percent decrease in income leads to a 15 percent decrease in the demand for a good,the income elasticity of demand equals

Accepted Answer

A)  -1/3 and the good is an inferior good. 
B)  1/3 and demand for the good is income elastic. 
C)  3 and the good is a normal good. 
D)  -3 and the demand for the good is income inelastic. 
E)  3 and the good is an inferior good.

Question 2

As you move up along a straight-line demand curve,

Accepted Answer

A)  the price elasticity of demand decreases in size. 
B)  the price elasticity of demand increases in size. 
C)  total revenue always decreases. 
D)  total revenue always increases. 
E)  total revenue never changes.

Question 3

What are the three cases for the price elasticity of demand? Briefly define each.

Accepted Answer

The answer of What are the three cases for the...

Question 4

If the percentage change in the quantity demanded is not zero but is less than the percentage change in the price,demand is

Accepted Answer

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

Question 5

The demand for necessities generally is ________ the demand for luxury goods.

Accepted Answer

A)  as elastic as 
B)  more elastic than 
C)  less elastic than 
D)  flatter than 
E)  not comparable to

Question 6

If a product is an inferior good,then its income elasticity of demand is

Accepted Answer

A)  zero. 
B)  positive. 
C)  negative. 
D)  indeterminate. 
E)  undefined.

Question 7

The price elasticity of demand for Red Delicious apples,a certain type of apple,is likely

Accepted Answer

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

Question 8

The demand for oil is inelastic.So,does an increase in the price of oil mean an increase in total revenue or a decrease in total revenue for oil producers?

Accepted Answer

The answer of The demand for oil is inelastic.So,does an...

Question 9

The income elasticity of demand for foreign travel

Accepted Answer

A)  is likely to be smaller than the income elasticity of demand for food. 
B)  is likely to be larger than the income elasticity of demand for food. 
C)  cannot be compared to the income elasticity of demand for food. 
D)  is likely to be inelastic. 
E)  is likely to be negative.

Question 10

The price of beef increased by 20 percent and the quantity supplied increased by 10 percent.The supply of beef is

Accepted Answer

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

Question 11

You are the brand manager of Crest toothpaste and you observe that when you increase the price of Crest,your total revenue increases.How is that possible?

Accepted Answer

The answer of You are the brand manager of Crest...

Question 12

$$\begin{array} { | c | c | } 
\hline \text { Price (dollars) } & \text { Quantity } \
\hline 10 & 0 \
\hline 9 & 1 \
\hline 8 & 2 \
\hline 7 & 3 \
\hline 6 & 4 \
\hline 5 & 5 \
\hline 4 & 6 \
\hline 3 & 7 \
\hline 2 & 8 \
\hline 1 & 9 \
\hline
\end{array}$$
-Using the table above,what is the elasticity of demand between the prices of $6 and $4?

Accepted Answer

A)  1 
B)  3/2 
C)  2/3 
D)  2 
E)  4

Question 13

The figure above shows the demand curve for Starbucks latte.
-In the figure above,the demand is inelastic in the range of prices between

Accepted Answer

A)  $3.50 and $4.50 per cup. 
B)  $2.50 and $3.50 per cup. 
C)  $1.00 and $2.00 per cup. 
D)  $2.25 and $4.50 per cup. 
E)  $2.75 and $3.75 per cup.

Question 14

When income increases from $30,000 a year to $40,000 a year,the quantity demanded of weekend vacations by Sara increases from 2 a year to 5 a year.For Sara,the income elasticity of demand of weekend vacations is ________ and weekend vacations are ________ good.

Accepted Answer

A)  3; a normal 
B)  4.5 a normal 
C)  1/3; an inferior 
D)  -4.5; an inferior 
E)  1/3; a normal

Question 15

Moving downward along a linear (straight-line)downward sloping demand curve,the

Accepted Answer

A)  slope is constant. 
B)  price is constant. 
C)  quantity is constant. 
D)  elasticity is constant. 
E)  None of the above answers is correct.

Question 16

To determine the price elasticity of demand,we

Accepted Answer

A)  need information on consumers' incomes. 
B)  need to know how much is available. 
C)  compare the percentage change in the quantity demanded to the percentage change in the price. 
D)  compare the change in the quantity to the change in price. 
E)  divide the quantity by the price.

Question 17

The greater the amount of time that passes after a price change,the

Accepted Answer

A)  less elastic supply becomes. 
B)  more elastic supply becomes. 
C)  more negative supply becomes. 
D)  steeper the supply curve becomes. 
E)  None of the above answers is correct.

Question 18

The cross elasticity of demand for blank DVDs and DVD burners is likely to be

Accepted Answer

A)  positive because they are substitutes. 
B)  positive because they are complements. 
C)  negative because they are substitutes. 
D)  negative because they are complements. 
E)  negative because with the advent of digital cameras, film and film cameras are inferior goods.

Question 19

Suppose bad weather decreases the quantity of wheat by 12 percent.If the price elasticity of demand for wheat is 0.6,how would the crop failure affect the price of wheat? Would the crop decrease benefit or harm wheat farmers?

Accepted Answer

The answer of Suppose bad weather decreases the quantity of...

Question 20

Joe receives a 20 percent increase in his income from his part time job and as a consequence decreases his consumption of Ramen noodles by 10 percent.Hence to Joe,Ramen noodles are

Accepted Answer

A)  a normal good with a price elasticity of demand of 0.5. 
B)  a substitute good with a cross elasticity of 0.5. 
C)  a good with a price elasticity of supply of -0.5. 
D)  an inferior good with an income elasticity of -0.5. 
E)  an inferior good with an income elasticity of -2.0.

Exam 5: Elasticities of Demand and Supply