Question 1

The responsiveness of demand to changes in income holding the good's relative price constant is

Accepted Answer

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

Question 2

The absolute price elasticity of demand would be the lowest for

Accepted Answer

A)  automobiles. 
B)  Pizza Hut pizza. 
C)  salt. 
D)  movie tickets.

Question 3

A perfectly inelastic supply curve is

Accepted Answer

A)  an upward sloping straight line that intersects the origin. 
B)  horizontal. 
C)  vertical. 
D)  downward sloping.

Question 4

If the price of one good increases, and as a result the demand for another related good falls, the goods are

Accepted Answer

A)  substitutes. 
B)  normal goods. 
C)  complements. 
D)  inferior goods.

Question 5

When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is

Accepted Answer

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

Question 6

A situation in which there is a reduction in quantity supplied to zero when there is the slightest decrease in price is

Accepted Answer

A)  perfectly elastic supply. 
B)  perfectly elastic demand. 
C)  perfectly inelastic supply. 
D)  perfectly inelastic demand.

Question 7

Which of the following is NOT a factor that determines the price elasticity of demand?

Accepted Answer

A)  The amount that suppliers have made available 
B)  The percentage of a consumer's total budget spent on the good 
C)  The existence of substitutes 
D)  The length of time allowed for adjustments to change in the price of the commodities

Question 8

The price elasticity of demand is a measure of

Accepted Answer

A)  the responsiveness of the quantity demanded of a good to a changes in the price of the good. 
B)  the quantity demanded of a good at a given price. 
C)  the demand for a product holding prices constant. 
D)  the horizontal shift in the demand curve when the price of a good changes.

Question 9

Price elasticities are calculated for four goods, and the values are: 4.1; 3.7; 1.0; 0.002. Which price elasticity is most elastic?

Accepted Answer

A)  4.1 
B)  3.7 
C)  1.0 
D)  0.002

Question 10

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent. The cross price elasticity of demand between goods X and Y is

Accepted Answer

A)  0.66. 
B)  1.75. 
C)  2.0. 
D)  1.5.

Question 11

-Use the above figure. Which graph depicts an inferior good?

Accepted Answer

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

Question 12

The formal definition of price elasticity of demand is

Accepted Answer

A)  change in quantity demanded divided by change in price. 
B)  quantity demanded divided by price. 
C)  percentage change in quantity demanded divided by percentage change in price. 
D)  quantity demanded multiplied by price and divided by 100.

Question 13

If one's demand for peanut butter decreases as income rises, the income elasticity of demand for the product is

Accepted Answer

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

Question 14

When two goods are substitutes for each other, the cross price elasticity of demand

Accepted Answer

A)  will be negative. 
B)  will be zero. 
C)  may be either positive or negative. 
D)  will be positive.

Question 15

Given a price elasticity of demand of -0.33, a decrease in price will

Accepted Answer

A)  reduce total revenue. 
B)  increase total revenue. 
C)  leave total revenue unchanged. 
D)  decrease quantity.

Question 16

Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is

Accepted Answer

A)  0.69. 
B)  1.45. 
C)  1.00. 
D)  infinity.

Question 17

Suppose that when the price of root beer rises 10%, the quantity of pizza demanded falls 20%. This would mean that pizza and root beer are

Accepted Answer

A)  substitutes, with a cross price elasticity of 0.5. 
B)  complements, with a cross price elasticity of -0.5. 
C)  substitutes, with a cross price elasticity of -2.0. 
D)  complements, with a cross price elasticity of -2.0.

Question 18

-In the above figure, along the section of the demand curve between point a and point b, demand is

Accepted Answer

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

Question 19

Generally, expenses on a sport utility vehicle are a large part of a consumer's budget, so the demand for sport utility vehicles is more likely to be

Accepted Answer