Question 1

The formula for income elasticity of demand may be written as which of the following?

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 2

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit.The price elasticity of demand for this product is

Accepted Answer

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

Question 3

Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t)there will be excess ________ for the good unless the demand curve is ________.

Accepted Answer

A) supply; horizontal 
B) supply; vertical 
C) demand; horizontal 
D) demand; vertical 
E) tax; unit elastic

Question 4

Consider the following data for a hypothetical economy.
  TABLE 4-5
-Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is ________.A rise in the price of gasoline causes the demand curve for transit passes to shift to the ________.

Accepted Answer

A) 5.0; right 
B) 0.33; right 
C) 0.33; left 
D) 0.2; right 
E) 0.2; left

Question 5

If the price elasticity of demand for some good is 2.7,a 10% increase in the price results in

Accepted Answer

A) a 2.7% decrease in the quantity demanded. 
B) a 2.7% increase in the quantity demanded. 
C) a 27% increase in the quantity demanded. 
D) a 27% decrease in the quantity demanded. 
E) There is not enough information to answer this question.

Question 6

What does the following statement imply about price elasticity of demand? "Cherry producers in British Columbia experienced a healthy increase in revenues this year,despite a reduced harvest due to poor weather conditions."

Accepted Answer

A) elastic demand for B.C.cherries 
B) elasticity of demand equal to one for B.C.cherries 
C) inelastic demand for B.C.cherries 
D) elasticity of demand equal to zero for B.C.cherries 
E) infinite elasticity of demand for B.C.cherries

Question 7

FIGURE 4-2
-Refer to Figure 4-2.In diagram 1,the elasticity of demand over the price range $14 to $16 is

Accepted Answer

A) 0. 
B) less than 1. 
C) 1. 
D) greater than 1. 
E) infinity.

Question 8

FIGURE 4-2
-Refer to Figure 4-2.There is good reason to suppose that,of the four goods whose demand curves are shown in diagrams 1-4 of the figure,the good that has the fewest close substitutes is shown in

Accepted Answer

A) diagram 1. 
B) diagram 2. 
C) diagram 3. 
D) diagram 4. 
E) There is not enough information to determine this.

Question 9

FIGURE 4-1
-Refer to Figure 4-1,which shows two demand curves,one linear and the other a rectangular hyperbola.In diagram 1,the price elasticity of demand

Accepted Answer

A) at point A is equal to that at point C. 
B) at point A is less than at point C. 
C) at point A is greater than at point C. 
D) is equal at points A,B,and C. 
E) at point A is equal to that at point B.

Question 10

If the income elasticity of demand for some good is 2.4,a 10% increase in income results in

Accepted Answer

A) a 24% increase in the quantity demanded. 
B) a 2.4% increase in the quantity demanded. 
C) a 240% increase in the quantity demanded. 
D) a 24% decrease in quantity demanded. 
E) a 240% decrease in quantity demanded.

Question 11

What does the following statement imply about price elasticity of demand? "Airlines experiencing higher traffic with reduced fares,but are struggling with fall in revenue."

Accepted Answer

A) demand for airline travel is price inelastic 
B) elasticity of demand for airline travel is equal to one 
C) elasticity of demand for airline travel is constant 
D) elasticity of demand for airline travel is equal to zero 
E) demand for airline travel is price elastic

Question 12

Producers will bear a larger burden of a sales tax if

Accepted Answer

A) demand is relatively elastic and supply is relatively inelastic. 
B) demand is relatively inelastic and supply is relatively elastic. 
C) both demand and supply are relatively inelastic. 
D) both demand and supply are relatively elastic. 
E) the tax is collected by firms rather than remitted directly to the government by consumers.

Question 13

Suppose empirical analysis concludes that the income elasticity of demand for Kraft Dinner (KD)is -0.2.The interpretation of this result is that

Accepted Answer

A) a 10% increase in income will lead to a 2% decrease in quantity demanded of KD. 
B) a 10% increase in income will lead to a 20% decrease in quantity demanded of KD. 
C) a 10% increase in income will lead to a 0.2% decrease in quantity demanded of KD. 
D) a 10% increase in income will lead to a 2% increase in quantity demanded of KD. 
E) a 10% increase in income will lead to a 20% increase in quantity demanded of KD.

Question 14

FIGURE 4-3
-Refer to Figure 4-3,which shows a demand shift and the short-run and long-run supply curves for some good.The diagram illustrates the general principle that

Accepted Answer

A) supply is less elastic in the long run. 
B) demand is less elastic in the long run. 
C) supply is more elastic in the long run. 
D) both demand and supply are less elastic in the long run. 
E) demand is more elastic in the long run.

Question 15

A demand curve that is the shape of a rectangular hyperbola

Accepted Answer

A) is elastic over the whole curve. 
B) is inelastic over the whole curve. 
C) is unit elastic over the whole curve. 
D) has the same elasticity as a straight-line demand curve. 
E) has an elasticity of 100% over the whole curve.

Question 16

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.Given the information this provides about price elasticity of demand,what is the predicted effect on total expenditure on tuition fees?

Accepted Answer

A) total expenditure will decrease 
B) total expenditure will decrease by 7% 
C) total expenditure will decrease by 3% 
D) total expenditure will increase 
E) total expenditure will remain constant

Question 17

If household income increases by 50% and desired household expenditure on vacation travel increases by 15%,the price elasticity of demand for vacation travel is

Accepted Answer

A) elastic. 
B) inelastic. 
C) unity. 
D) positive. 
E) not determinable from the information given.

Question 18

If two goods,X and Y,have a positive cross elasticity of demand,then we know that they

Accepted Answer

A) are both normal goods. 
B) are complements. 
C) are both inferior goods. 
D) each have a price elasticity greater than one. 
E) are substitutes.

Question 19

Consider an excise tax imposed on daily parking charges in the downtown of a small city.Before the imposition of the tax,equilibrium price and quantity are $15 and 100 cars parked.(P = $15,Q = 100).The city government imposes a tax of $3 per car parked per day.Market equilibrium adjusts to P = $16 and Q = 95.How much tax revenue does the city government collect per day?

Accepted Answer

A) $95 
B) $100 
C) $285 
D) $300 
E) $1710

Question 20

Which of the following situations could explain why product X has a relatively high price elasticity of demand in the short run?

Accepted Answer

A) the price of product X is too low 
B) the price of product X is too high 
C) the prices of substitute products are constant 
D) there are many substitutes for product X and consumers have an ability to switch quickly to those substitutes 
E) there are few substitutes for product X in the short run

Exam 4: Elasticity

The formula for income elasticity of demand may be written as which of the following?

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit.The price elasticity of demand for this product is

Suppose a market is in equilibrium at price P₀,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P₀ + t) there will be excess for the good unless the demand curve is .

Consider the following data for a hypothetical economy. TABLE 4-5 -Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is .A rise in the price of gasoline causes the demand curve for transit passes to shift to the .

If the price elasticity of demand for some good is 2.7,a 10% increase in the price results in

What does the following statement imply about price elasticity of demand? "Cherry producers in British Columbia experienced a healthy increase in revenues this year,despite a reduced harvest due to poor weather conditions."

FIGURE 4-2 -Refer to Figure 4-2.In diagram 1,the elasticity of demand over the price range $14 to $16 is

FIGURE 4-2 -Refer to Figure 4-2.There is good reason to suppose that,of the four goods whose demand curves are shown in diagrams 1-4 of the figure,the good that has the fewest close substitutes is shown in

FIGURE 4-1 -Refer to Figure 4-1,which shows two demand curves,one linear and the other a rectangular hyperbola.In diagram 1,the price elasticity of demand

If the income elasticity of demand for some good is 2.4,a 10% increase in income results in

What does the following statement imply about price elasticity of demand? "Airlines experiencing higher traffic with reduced fares,but are struggling with fall in revenue."

Producers will bear a larger burden of a sales tax if

Suppose empirical analysis concludes that the income elasticity of demand for Kraft Dinner (KD) is -0.2.The interpretation of this result is that

FIGURE 4-3 -Refer to Figure 4-3,which shows a demand shift and the short-run and long-run supply curves for some good.The diagram illustrates the general principle that

A demand curve that is the shape of a rectangular hyperbola

If household income increases by 50% and desired household expenditure on vacation travel increases by 15%,the price elasticity of demand for vacation travel is

If two goods,X and Y,have a positive cross elasticity of demand,then we know that they

Which of the following situations could explain why product X has a relatively high price elasticity of demand in the short run?

Exam 4: Elasticity

The formula for income elasticity of demand may be written as which of the following?

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit.The price elasticity of demand for this product is

Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t) there will be excess ________ for the good unless the demand curve is ________.

Consider the following data for a hypothetical economy. TABLE 4-5 -Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is ________.A rise in the price of gasoline causes the demand curve for transit passes to shift to the ________.

If the price elasticity of demand for some good is 2.7,a 10% increase in the price results in

What does the following statement imply about price elasticity of demand? "Cherry producers in British Columbia experienced a healthy increase in revenues this year,despite a reduced harvest due to poor weather conditions."

FIGURE 4-2 -Refer to Figure 4-2.In diagram 1,the elasticity of demand over the price range $14 to $16 is

FIGURE 4-2 -Refer to Figure 4-2.There is good reason to suppose that,of the four goods whose demand curves are shown in diagrams 1-4 of the figure,the good that has the fewest close substitutes is shown in

FIGURE 4-1 -Refer to Figure 4-1,which shows two demand curves,one linear and the other a rectangular hyperbola.In diagram 1,the price elasticity of demand

If the income elasticity of demand for some good is 2.4,a 10% increase in income results in

What does the following statement imply about price elasticity of demand? "Airlines experiencing higher traffic with reduced fares,but are struggling with fall in revenue."

Producers will bear a larger burden of a sales tax if

Suppose empirical analysis concludes that the income elasticity of demand for Kraft Dinner (KD) is -0.2.The interpretation of this result is that

FIGURE 4-3 -Refer to Figure 4-3,which shows a demand shift and the short-run and long-run supply curves for some good.The diagram illustrates the general principle that

A demand curve that is the shape of a rectangular hyperbola

If household income increases by 50% and desired household expenditure on vacation travel increases by 15%,the price elasticity of demand for vacation travel is

If two goods,X and Y,have a positive cross elasticity of demand,then we know that they

Which of the following situations could explain why product X has a relatively high price elasticity of demand in the short run?

Suppose a market is in equilibrium at price P₀,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P₀ + t) there will be excess for the good unless the demand curve is .

Consider the following data for a hypothetical economy. TABLE 4-5 -Refer to Table 4-5.The cross-price elasticity of demand for transit passes in terms of the price of gasoline is .A rise in the price of gasoline causes the demand curve for transit passes to shift to the .