Question 1

Sketch three demand curves. Curve A should be perfectly elastic, curve B should be perfectly inelastic and curve C should be unit elastic.

Accepted Answer

The answer of Sketch three demand curves. Curve A should...

Question 2

When the price of digital SLR cameras was $2000, consumers bought 4000. When the price fell to $1200, consumers bought 14 000. What was the price elasticity of demand between these two prices, calculated with the midpoint method? Is demand elastic or inelastic?

Accepted Answer

The answer of When the price of digital SLR cameras...

Question 3

Table 5-1
Suppose a coffee shop faces the following demand schedule for coffee.
 
-Referring to Table 5-1, comparing the sales at $1.00 and $3.00, which of the statements below is true?

Accepted Answer

A)  the price elasticity of demand is higher at $3.00 than $1.00 
B)  the price elasticity of demand is lower at $3.00 than at $1.00 
C)  the price elasticity of demand is the same at both prices 
D)  the price elasticity of demand at $3.00 is zero

Question 4

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

Accepted Answer

A)  supply of crocodile-leather handbags would tend to be price elastic 
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 5

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 6

If a person has very little concern for her health, her demand for healthcare would tend to be:

Accepted Answer

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

Question 7

In the aftermath of the US decision to halt logging of Pacific North-West forests in 1990 to protect spotted owls, the global demand for Australian and New Zealand timber jumped. Predict how Australasian forestry companies responded to the increased demand in the short run and in the long run.

Accepted Answer

The answer of In the aftermath of the US decision...

Question 8

The president of the university is concerned about increasing operating costs and decides to raise tuition fees in an attempt to increase university revenue. Do you think the rise in tuition fees will accomplish the president's goal?

Accepted Answer

The answer of The president of the university is concerned...

Question 9

Suppose that the slope of the demand curve becomes flatter at a given price. This means that the price elasticity of demand at this point will:

Accepted Answer

A)  increase 
B)  decrease 
C)  not change 
D)  be zero

Question 10

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

Accepted Answer

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

Question 11

If the quantity supplied responds only slightly to changes in price, then:

Accepted Answer

A)  supply is said to be elastic 
B)  increases in supply resulting from an increase in price will not shift the supply curve very much 
C)  supply is said to be inelastic 
D)  supply is said to be unit elastic

Question 12

If the demand curve is linear and downward-sloping, which of the following would NOT be correct?

Accepted Answer

A)  the upper part of the demand curve is more elastic than the lower part 
B)  elasticity will change with a movement down the curve 
C)  the lower part of the demand curve will be less elastic than the upper part 
D)  elasticity and slope will both remain constant along the curve

Question 13

A perfectly inelastic demand curve:

Accepted Answer

A)  rises upward and to the right but has a constant slope 
B)  can be drawn as a line parallel to the vertical axis 
C)  cannot be shown on a two-dimensional graph 
D)  can be represented by a line parallel to the horizontal axis

Question 14

In the case of a downward linear demand curve, total revenue is always maximised at

Accepted Answer

A)  at the upper end of the demand curve 
B)  at the lower end of the demand curve 
C)  at the midpoint of the demand curve 
D)  it is impossible to tell without knowing the price and quantity demanded

Question 15

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 16

Graph 5-2
 
-If there is a 10 per cent increase in the price of a good and this leads to a four per cent decrease in the quantity demanded then the price elasticity is:

Accepted Answer

A)  2.5 and elastic 
B)  2.5 and inelastic 
C)  0.4 and elastic 
D)  0.4 and inelastic

Question 17

Table 5-1
Suppose a coffee shop faces the following demand schedule for coffee.
 
-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 18

Graph 5-3
 
-In Graph 5-3, as price falls from PA to PB, which demand curve is most elastic?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  all of the above are equally elastic

Question 19

The demand for a good tends to be more elastic:

Accepted Answer

A)  the longer the period of time 
B)  the greater the availability of close substitutes 
C)  the narrower the definition of the market 
D)  all of the above are correct

Question 20

If a good is a necessity, demand for the good would tend to be:

Accepted Answer

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

Exam 5: Elasticity and Its Application

Sketch three demand curves. Curve A should be perfectly elastic, curve B should be perfectly inelastic and curve C should be unit elastic.

When the price of digital SLR cameras was $2000, consumers bought 4000. When the price fell to $1200, consumers bought 14 000. What was the price elasticity of demand between these two prices, calculated with the midpoint method? Is demand elastic or inelastic?

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -Referring to Table 5-1, comparing the sales at $1.00 and $3.00, which of the statements below is true?

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

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

If a person has very little concern for her health, her demand for healthcare would tend to be:

In the aftermath of the US decision to halt logging of Pacific North-West forests in 1990 to protect spotted owls, the global demand for Australian and New Zealand timber jumped. Predict how Australasian forestry companies responded to the increased demand in the short run and in the long run.

The president of the university is concerned about increasing operating costs and decides to raise tuition fees in an attempt to increase university revenue. Do you think the rise in tuition fees will accomplish the president's goal?

Suppose that the slope of the demand curve becomes flatter at a given price. This means that the price elasticity of demand at this point will:

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

If the quantity supplied responds only slightly to changes in price, then:

If the demand curve is linear and downward-sloping, which of the following would NOT be correct?

A perfectly inelastic demand curve:

In the case of a downward linear demand curve, total revenue is always maximised at

In which of the following cases will total revenue increase?

Graph 5-2 -If there is a 10 per cent increase in the price of a good and this leads to a four per cent decrease in the quantity demanded then the price elasticity is:

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -How does total revenue change as one moves down a linear demand curve?

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is most elastic?

The demand for a good tends to be more elastic:

If a good is a necessity, demand for the good would tend to be:

Exam 5: Elasticity and Its Application

Sketch three demand curves. Curve A should be perfectly elastic, curve B should be perfectly inelastic and curve C should be unit elastic.

When the price of digital SLR cameras was $2000, consumers bought 4000. When the price fell to $1200, consumers bought 14 000. What was the price elasticity of demand between these two prices, calculated with the midpoint method? Is demand elastic or inelastic?

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -Referring to Table 5-1, comparing the sales at $1.00 and $3.00, which of the statements below is true?

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

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

If a person has very little concern for her health, her demand for healthcare would tend to be:

In the aftermath of the US decision to halt logging of Pacific North-West forests in 1990 to protect spotted owls, the global demand for Australian and New Zealand timber jumped. Predict how Australasian forestry companies responded to the increased demand in the short run and in the long run.

The president of the university is concerned about increasing operating costs and decides to raise tuition fees in an attempt to increase university revenue. Do you think the rise in tuition fees will accomplish the president's goal?

Suppose that the slope of the demand curve becomes flatter at a given price. This means that the price elasticity of demand at this point will:

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

If the quantity supplied responds only slightly to changes in price, then:

If the demand curve is linear and downward-sloping, which of the following would NOT be correct?

A perfectly inelastic demand curve:

In the case of a downward linear demand curve, total revenue is always maximised at

In which of the following cases will total revenue increase?

Graph 5-2 -If there is a 10 per cent increase in the price of a good and this leads to a four per cent decrease in the quantity demanded then the price elasticity is:

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -How does total revenue change as one moves down a linear demand curve?

Graph 5-3 -In Graph 5-3, as price falls from PA to PB, which demand curve is most elastic?

The demand for a good tends to be more elastic:

If a good is a necessity, demand for the good would tend to be:

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is most elastic?