Question 1

In December 2014, the average price of gasoline in the United States was $2.50 per gallon and consumers bought 7 percent more gasoline than they had during April 2014, when the average price was $3.60 per gallon.Based on these figures, from April 2014 to December 2014, the demand for gasoline was

Accepted Answer

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

Question 2

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase, quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?

Accepted Answer

A) 60 percent 
B) 15 percent 
C) 6.7 percent 
D) impossible to determine without additional information

Question 3

Holding everything else constant, the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes in general.

Accepted Answer

A) less than 
B) equal to 
C) twice as great as 
D) greater than

Question 4

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

Accepted Answer

A) 0.11 
B) 0.37 
C) 2.69 
D) 9.33

Question 5

Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day.If the price elasticity of supply for oil in the short run is estimated at 0.5, use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.

Accepted Answer

The answer of Suppose the current price of oil is...

Question 6

Of the following, which is the best example of good with a perfectly inelastic demand?

Accepted Answer

A) the demand for tickets in New York City when the Mets or Yankees are in the World Series 
B) the demand for gasoline 
C) a diabetic's demand for insulin 
D) the demand for a college education by a student who has a full scholarship to an Ivy League school

Question 7

Figure 6-7
 
-Refer to Figure 6-7.Using the total revenue test to verify the price elasticity between points a and b on the demand curve, demand is

Accepted Answer

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

Question 8

The price of wheat has fallen since 1950.Which of the following explains this price decline?

Accepted Answer

A) The price elasticity of demand is less than 1 (in absolute value)and the income elasticity of demand for wheat is low. 
B) The price elasticity of demand is greater than 1 (in absolute value)and the income elasticity of demand for wheat is low. 
C) The price elasticity of demand is less than 1 (in absolute value)and wheat is an inferior good. 
D) The price elasticity of demand is greater than 1 (in absolute value)and the income elasticity of demand for wheat is greater than 1.

Question 9

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

Accepted Answer

A) The toothpaste industry is highly competitive. 
B) Toothpaste is relatively inexpensive. 
C) Toothpaste is heavily endorsed by dentists. 
D) There are few close substitutes for toothpaste.

Question 10

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore,

Accepted Answer

A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 11

Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million gallons a day were sold.In October 2004, the price averaged $2.15 a gallon and 14 million gallons were sold.If the demand for gasoline did not shift between these two months, use the midpoint formula to calculate the price elasticity of demand.Indicate whether demand was elastic or inelastic.

Accepted Answer

The answer of Suppose the price of gasoline in July...

Question 12

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

Accepted Answer

A) less then 0.8 in absolute value. 
B) greater than 0.8 in absolute value. 
C) equal to 1 in absolute value. 
D) equal to zero because the DVD of this movie has been out for several years.

Question 13

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is

Accepted Answer

A) -0.67. 
B) 0.67. 
C) 1.5. 
D) 2.

Question 14

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

Accepted Answer

A) True 
 B)False

Question 15

Assume that the price elasticity of demand for gasoline is -0.06.If the government tax causes the price of gasoline to increase by 50 percent, what will be the decrease in the quantity of gasoline demanded?

Accepted Answer

A) 0.5 percent 
B) 3.0 percent 
C) 8.33 percent 
D) 50 percent

Question 16

According to a study of the U.S.demand for alcoholic beverages, the price elasticity of demand for beer is -0.30.Which of the following could explain why the price elasticity of demand for beer is low?

Accepted Answer

A) Beer is an inferior alcoholic beverage. 
B) More and more people are switching to wine and cocktails rather than beer. 
C) The price of beer is relatively low and for many people it is a habit forming product. 
D) There are only a few major suppliers of beer.

Question 17

Suppose the supply of bicycles is price elastic.This means that

Accepted Answer

A) consumers will respond significantly to an increase in the quantity of bicycles supplied. 
B) suppliers will increase the quantity of bicycles supplied, but not immediately. 
C) suppliers face many substitutes for bicycles. 
D) suppliers will respond significantly to changes in the price of bicycles.

Question 18

The price elasticity of demand is equal to

Accepted Answer

A) the value of the slope of the demand curve. 
B) the change in quantity demanded divided by the change in price. 
C) the percentage change in price divided by the percentage change in quantity demanded. 
D) the percentage change in quantity demanded divided by the percentage change in price.

Question 19

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Accepted Answer

The answer of When is demand perfectly elastic? When is...

Question 20

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Accepted Answer

The answer of Explain the economic concept of price elasticity...

Exam 6: Elasticity: the Responsiveness of Demand and Supply