Question 1

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

Accepted Answer

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

Question 2

Use the following for questions 108-115.
Exhibit: The Demand for Bungalow Bob's Bagels
 
-(Exhibit: The Demand for Bungalow Bob's Bagels) Demand is unit price elastic between:

Accepted Answer

A)  $0.30 and $0.40. 
B)  $0.40 and $0.50. 
C)  $0.50 and $0.60. 
D)  $0.60 and $0.70.

Question 3

Suppose the demand curve has a slope equal to negative 1.The price elasticity of demand at any point on this demand curve is:

Accepted Answer

A)  infinite. 
B)  equal to zero. 
C)  greater than 1, but less than infinite. 
D)  not described by any of the above.

Question 4

The price elasticity of supply for milk in the short run has been estimated to be 0.36 while the price elasticity of supply for milk in the long run is estimated to be 0.51.That means that:

Accepted Answer

A)  the supply of milk reflects the fact that the longer the time period the more price elastic is the supply. 
B)  the supply of milk reflects the fact that the longer the time period the less price elastic is the supply. 
C)  the supply of milk reflects the fact that the shorter the time period the more price elastic is supply. 
D)  both B and C are true.

Question 5

Draw a demand curve that is perfectly elastic, one that is perfectly inelastic, and one that is unit price elastic throughout.Explain their differences.Draw a linear demand curve and explain why the price elasticity coefficient declines as price falls and quantity demanded increases as we move downward along the demand curve.

Accepted Answer

The answer of Draw a demand curve that is perfectly...

Question 6

Use the following to answer question(s): Demand for Shirts
 
-(Exhibit: Demand for Shirts) The price elasticity of demand for the segment BC is:

Accepted Answer

A)  greater than 3.33 (absolute value). 
B)  -3.33. 
C)  -3. 
D)  -0.33.

Question 7

The income elasticity of demand for eggs has been estimated to be 0.57.If income grows by 15 percent in a period, how will that affect total expenditures on eggs in that period, all other things unchanged?

Accepted Answer

A)  total expenditures will fall 
B)  total expenditures will rise 
C)  total expenditures will remain unchanged 
D)  not enough information is given to answer the question

Question 8

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:

Accepted Answer

A)  inferior goods. 
B)  superior goods. 
C)  substitute goods. 
D)  complementary goods.

Question 9

Use the following to answer question(s): Demand and Price Elasticity 2
 
-(Exhibit: Demand and Price Elasticity 2) Going from point B to C, the demand curve is:

Accepted Answer

A)  price inelastic. 
B)  unit price elastic. 
C)  price elastic. 
D)  both price elastic and price inelastic.

Question 10

A demand curve that is perfectly inelastic:

Accepted Answer

A)  will be vertical. 
B)  will be horizontal. 
C)  will be upward sloping. 
D)  has an elasticity equal to 1 everywhere on the curve.

Question 11

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are:

Accepted Answer

A)  unrelated goods. 
B)  complementary goods. 
C)  inferior goods. 
D)  substitute goods.

Question 12

Assuming the law of demand holds for a good, its price elasticity of demand is:

Accepted Answer

A)  positive. 
B)  greater than 1. 
C)  equal to 1. 
D)  negative.

Question 13

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is:

Accepted Answer

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

Question 14

If the percentage change in quantity demanded is greater than the percentage change in price, the demand curve has unit price elasticity.

Accepted Answer

A) True 
 B)False

Question 15

If a demand curve is unit price elastic throughout, then a decrease in supply will result in:

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue. 
D)  a decrease in demand.

Question 16

Use the following for questions 163-168.
Exhibit: Johnson's Income and Expenditures
Quantity Purchased per Month
 
-(Exhibit: Johnson's Income and Expenditures) For Johnson, pizzas are a(n):

Accepted Answer

A)  inferior good. 
B)  positive good. 
C)  neutral good. 
D)  normal good.

Question 17

When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue.This suggests that demand is:

Accepted Answer

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

Question 18

The price elasticity of demand for cabbage has been estimated to be -0.25.If an insect infestation destroys 20 percent of the nation's cabbage crop, how will that affect total expenditures on cabbage, all other things unchanged?

Accepted Answer

A)  total expenditures will rise 
B)  total expenditures will fall 
C)  total expenditures will remain unchanged 
D)  not enough information is given to answer the question

Question 19

If an increase in income leads to an increase in the demand for a good, then the good is said to be:

Accepted Answer

A)  normal. 
B)  a luxury. 
C)  inferior. 
D)  a staple or necessity.

Question 20

The price elasticity of demand for gasoline in the long run has been estimated to be -1.5.If an extended war in the Middle-East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things unchanged?

Accepted Answer

A)  total expenditures would rise 
B)  total expenditures would fall 
C)  total expenditures would remain unchanged 
D)  not enough information is given to answer the question

Exam 5: Elasticity: a Measure of Response