Question 1

Ray is one of many sellers of furniture in a large city that has many furniture stores. If he tries to raise the price of a sofa even slightly, he loses all of his business to one of his competitors. The demand for Ray's sofas is:

Accepted Answer

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

Question 2

If Ana's income elasticity of demand for rice is -2, what happens to the quantity of rice she buys if her income decreases by 20 percent?

Accepted Answer

A)   She buys 20 percent more rice.
B)   She buys 20 percent less rice.
C)   She buys 40 percent less rice.
D)   She buys 40 percent more rice. D

Question 3

Suppose that a 20 percent increase in the price of throw pillows leads to a 60 percent decrease in the quantity demanded of throw pillows. What is the price elasticity of demand for throw pillows? If a seller of this good wants to change the price in order to increase total revenue from selling throw pillows, what should it do? Explain.

Accepted Answer

Mathematically, this is expressed as -60%/20% = -3. The price elasticity of demand for throw pillows is 3. A price elasticity of demand of 3 indicates an elastic price elasticity of demand. A seller should decrease the price of this good to increase total revenue. When demand is elastic, the percentage change increase in quantity demanded will be larger than the percentage change decrease in the price of the good.

Question 4

If an economist wants to know if two goods are complements or substitutes, which is the appropriate elasticity to calculate?

Accepted Answer

A)   elasticity of supply
B)   price elasticity of demand
C)   cross-price elasticity of demand
D)   income elasticity of demand

Question 5

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. What can be concluded based on tax incidence in this market?
​
Figure: A Tax on the Demand for a Good II

Accepted Answer

A)   The price elasticity of demand is smaller than the price elasticity of supply.
B)   The price elasticity of demand is larger than the price elasticity of supply.
C)   The price elasticity of supply is equal to the price elasticity of demand.
D)   The entire burden of the tax falls on the buyers of this good.

Question 6

When Otto's income increases, he buys fewer frozen vegetables. Based on this, we can conclude that:

Accepted Answer

A)   Otto is irrational.
B)   Otto considers frozen vegetables to be inferior goods.
C)   frozen vegetables are necessities.
D)   frozen vegetables are luxuries.

Question 7

Use the figure A Tax on the Demand for a Good). If we know that the price elasticity of demand is larger than the price elasticity of supply, what is true?
​
Figure: A Tax on the Demand for a Good

Accepted Answer

A)   The size of area A is larger than the size of area B.
B)   The size of area A is smaller than the size of area B.
C)   Area A and area B are the same size.
D)   The buyer of this good pays the entire tax incidence because it is being taxed.

Question 8

List the factors that determine whether a good has an inelastic price elasticity of demand.

Accepted Answer

The answer of List the factors that determine whether a...

Question 9

If consumers' response to a price change is a relatively large change in the quantity demanded, then the price elasticity of demand is _____, and demand is considered to be:

Accepted Answer

A)   less than one; inelastic.
B)   greater than one; inelastic.
C)   less than one; elastic.
D)   greater than one; elastic.

Question 10

The percentage change in quantity supplied in response to the percentage change in price is the:

Accepted Answer

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

Question 11

An economist has determined that the income elasticity of demand for a movie streaming service is 1.2. How should she interpret this value?

Accepted Answer

A)   Movie streaming services are normal, luxury goods.
B)   Movie streaming services are inferior, necessity goods.
C)   Movie streaming services are normal, necessity goods.
D)   Movie streaming services are inferior, complementary goods.

Question 12

Seamus sells 100 party hats when the price of party hats is $10 and sells 120 party hats when the price of party hats is $15. Seamus's price elasticity of supply is:

Accepted Answer

A)   perfectly elastic.
B)   equal to 0.455.
C)   equal to 2.2.
D)   perfectly inelastic.

Question 13

The price elasticity of demand for tambourines is 0.25, and the price elasticity of supply for tambourines is 2. What happens if an excise tax is placed on the sellers of tambourines?

Accepted Answer

A)   The entire burden of the tax falls on the sellers.
B)   The incidence of the tax falls more heavily on the buyers.
C)   Sellers pay the entire burden of the tax.
D)   Buyers and sellers share the incidence of this tax equally.

Question 14

How is price elasticity of demand calculated?

Accepted Answer

A)   the ratio of the percentage change in price to the percentage change in quantity demanded
B)   the ratio of the percentage change in quantity demanded to the percentage change in price
C)   the difference between the percentage change in price and the percentage change in quantity demanded
D)   the difference between the percentage change in quantity demanded and the percentage change in price

Question 15

(Use Figure: A Demand Curve) Use the figure A Demand Curve. What kind of demand does this good have?
​
Figure: A Demand Curve

Accepted Answer

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

Question 16

Profit is the:

Accepted Answer

A)   total amount of money a firm takes in.
B)   difference between total revenue and total costs.
C)   difference between the price of a good and its total revenue.
D)   total amount of sales a firm has.

Question 17

The sign of the cross-price elasticity of demand:

Accepted Answer

A)   indicates whether two goods are complements or substitutes.
B)   indicates whether a good is normal or inferior.
C)   is always positive.
D)   is always negative, but the sign is customarily dropped for convenience.

Question 18

A good that a consumer always buys more of when income increases is:

Accepted Answer

A)   a complement.
B)   a substitute.
C)   an inferior good.
D)   a normal good.

Question 19

A seller wants to increase its total revenue and decides to increase its price to do so. This seller thinks that the demand for its good is:

Accepted Answer

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

Question 20

What happens to the price elasticity of demand as price increases and you move from right to left along a demand curve?

Accepted Answer

A)   It starts low and increases as you move from right to left.
B)   It starts low, at first increases, but then decreases after you cross the midpoint of the demand curve.
C)   It starts high and decreases as you move from right to left.
D)   It starts high, at first decreases, but then increases after you cross the midpoint of the demand curve.

Exam 6: Elasticity

Ray is one of many sellers of furniture in a large city that has many furniture stores. If he tries to raise the price of a sofa even slightly, he loses all of his business to one of his competitors. The demand for Ray's sofas is:

If Ana's income elasticity of demand for rice is -2, what happens to the quantity of rice she buys if her income decreases by 20 percent?

If an economist wants to know if two goods are complements or substitutes, which is the appropriate elasticity to calculate?

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. What can be concluded based on tax incidence in this market? Figure: A Tax on the Demand for a Good II

When Otto's income increases, he buys fewer frozen vegetables. Based on this, we can conclude that:

Use the figure A Tax on the Demand for a Good) . If we know that the price elasticity of demand is larger than the price elasticity of supply, what is true? Figure: A Tax on the Demand for a Good

List the factors that determine whether a good has an inelastic price elasticity of demand.

If consumers' response to a price change is a relatively large change in the quantity demanded, then the price elasticity of demand is _____, and demand is considered to be:

The percentage change in quantity supplied in response to the percentage change in price is the:

An economist has determined that the income elasticity of demand for a movie streaming service is 1.2. How should she interpret this value?

Seamus sells 100 party hats when the price of party hats is $10 and sells 120 party hats when the price of party hats is $15. Seamus's price elasticity of supply is:

The price elasticity of demand for tambourines is 0.25, and the price elasticity of supply for tambourines is 2. What happens if an excise tax is placed on the sellers of tambourines?

How is price elasticity of demand calculated?

(Use Figure: A Demand Curve) Use the figure A Demand Curve. What kind of demand does this good have? Figure: A Demand Curve

Profit is the:

The sign of the cross-price elasticity of demand:

A good that a consumer always buys more of when income increases is:

A seller wants to increase its total revenue and decides to increase its price to do so. This seller thinks that the demand for its good is:

What happens to the price elasticity of demand as price increases and you move from right to left along a demand curve?

Exam 6: Elasticity

Ray is one of many sellers of furniture in a large city that has many furniture stores. If he tries to raise the price of a sofa even slightly, he loses all of his business to one of his competitors. The demand for Ray's sofas is:

If Ana's income elasticity of demand for rice is -2, what happens to the quantity of rice she buys if her income decreases by 20 percent?

If an economist wants to know if two goods are complements or substitutes, which is the appropriate elasticity to calculate?

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. What can be concluded based on tax incidence in this market? ​ Figure: A Tax on the Demand for a Good II

When Otto's income increases, he buys fewer frozen vegetables. Based on this, we can conclude that:

Use the figure A Tax on the Demand for a Good) . If we know that the price elasticity of demand is larger than the price elasticity of supply, what is true? ​ Figure: A Tax on the Demand for a Good

List the factors that determine whether a good has an inelastic price elasticity of demand.

If consumers' response to a price change is a relatively large change in the quantity demanded, then the price elasticity of demand is _____, and demand is considered to be:

The percentage change in quantity supplied in response to the percentage change in price is the:

An economist has determined that the income elasticity of demand for a movie streaming service is 1.2. How should she interpret this value?

Seamus sells 100 party hats when the price of party hats is $10 and sells 120 party hats when the price of party hats is $15. Seamus's price elasticity of supply is:

The price elasticity of demand for tambourines is 0.25, and the price elasticity of supply for tambourines is 2. What happens if an excise tax is placed on the sellers of tambourines?

How is price elasticity of demand calculated?

(Use Figure: A Demand Curve) Use the figure A Demand Curve. What kind of demand does this good have? ​ Figure: A Demand Curve

Profit is the:

The sign of the cross-price elasticity of demand:

A good that a consumer always buys more of when income increases is:

A seller wants to increase its total revenue and decides to increase its price to do so. This seller thinks that the demand for its good is:

What happens to the price elasticity of demand as price increases and you move from right to left along a demand curve?

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. What can be concluded based on tax incidence in this market? Figure: A Tax on the Demand for a Good II

Use the figure A Tax on the Demand for a Good) . If we know that the price elasticity of demand is larger than the price elasticity of supply, what is true? Figure: A Tax on the Demand for a Good

(Use Figure: A Demand Curve) Use the figure A Demand Curve. What kind of demand does this good have? Figure: A Demand Curve