Question 1

A demand curve which is ________ represents perfectly inelastic demand,and a demand curve which is ________ represents inelastic demand.

Accepted Answer

A)  downward sloping; vertical 
B)  horizontal; downward sloping 
C)  vertical; downward sloping 
D)  upward sloping; horizontal

Question 2

Assume that the market for barley is in equilibrium and the demand for barley is inelastic.Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley.The drought will cause farm revenue to________.

Accepted Answer

A)  rise because there will be a shortage of barley. 
B)  rise because the percentage decrease in quantity sold is less than the percentage increase in price. 
C)  rise because the percentage increase in quantity sold is greater than the percentage increase in price. 
D)  fall because of the decrease in the quantity of barley sold.

Question 3

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Accepted Answer

A) True 
 B)False

Question 4

What does a demand curve that is horizontal indicate about a commodity?

Accepted Answer

A)  It has few substitutes. 
B)  It must be very cheap. 
C)  It is a necessity. 
D)  It has a large number of substitutes.

Question 5

What does price elasticity of demand measure?

Accepted Answer

A)  How responsive suppliers are to price changes 
B)  How responsive sales are to changes in the price of a related good 
C)  How responsive quantity demanded is to a change in price 
D)  How responsive sales are to a change in buyers' incomes

Question 6

Suppose when the price of jean jackets increased by 10 per cent,the quantity supplied increased by 16 per cent.Based on this information the price elasticity of supply of jean jackets is ________.

Accepted Answer

A)  0.625 per cent 
B)  6% per cent 
C)  1.6 per cent

Question 7

The price elasticity of supply is equal to________.

Accepted Answer

A)  the value of the slope of the supply curve 
B)  the change in quantity supplied divided by the change in price 
C)  the percentage change in price divided by the percentage change in quantity supplied 
D)  the percentage change in quantity supplied divided by the percentage change in price

Question 8

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that________.

Accepted Answer

A)  the decrease in quantity sold is proportionately larger than the resulting change in price 
B)  the resulting increase in price is proportionately greater than decrease in quantity sold 
C)  the demand curve for wheat must be vertical 
D)  the supply curve for wheat must be vertical

Question 9

The price elasticity of demand for canned soup is estimated at −1.62.If the price of canned soup rises,sales revenue________.

Accepted Answer

A)  falls by 162 per cent 
B)  rises by 1.62 per cent 
C)  falls 
D)  rises

Question 10

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

Accepted Answer

A)  0.5 per cent 
B)  3.0 per cent 
C)  8.33 per cent 
D)  50 per cent

Question 11

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

Accepted Answer

A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged. 
D)  It cannot be determined without information on prices.

Question 12

Suppose when Nablom's Bakery raised the price of its breads by 10 per cent,the quantity demanded fell by 15 per cent.What was the effect on sales revenue?

Accepted Answer

A)  Sales revenue increased. 
B)  Sales revenue remained unchanged. 
C)  Sales revenue decreased. 
D)  It cannot be determined without information on prices.

Question 13

Carrie Bradshaw claims that when it comes to buying shoes,'price is no object'.If this is true,then what is her demand for shoes?

Accepted Answer

A)  Perfectly elastic 
B)  Perfectly inelastic 
C)  Unit-elastic 
D)  Horizontal

Question 14

The slope of a demand curve is not used to measure the price elasticity of demand because _______.

Accepted Answer

A)  the slope of a linear demand curve is not constant 
B)  the slope of a line cannot have a negative value 
C)  the measurement of slope is sensitive to the units chosen for price and quantity 
D)  the slope of the demand curve does not tell us how much quantity changes as price changes

Question 15

The price elasticity of supply measures________.

Accepted Answer

A)  the responsiveness of quantity supplied to changes in input prices 
B)  the responsiveness of quantity supplied to changes in technology 
C)  the responsiveness of quantity supplied to changes in price 
D)  a supplier's ability to produce a good in the face of scarcity

Question 16

If a 5 per cent increase in income leads to a 10 per cent increase in quantity demanded for airline travel,then airline travel is _______.

Accepted Answer

A)  a necessity 
B)  a substitute for another good 
C)  a luxury 
D)  an inferior good

Question 17

During an economic expansion,as consumer incomes rise,holding everything else constant,_________.

Accepted Answer

A)  the demand for most goods, except luxuries, will rise 
B)  the demand for luxuries will rise while the demand for inferior goods will fall 
C)  the demand for luxuries and inferior goods will rise 
D)  the prices of luxuries will fall while the prices of inferior goods will rise

Question 18

The item below likely to have the highest income elasticity of demand is ________.

Accepted Answer

A)  a luxury cruise to several European countries 
B)  water 
C)  breakfast cereal 
D)  a hamburger

Question 19

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if _______.

Accepted Answer

A)  demand is elastic and supply is inelastic 
B)  demand is inelastic and supply is elastic 
C)  both demand and supply are inelastic 
D)  both demand and supply are elastic

Question 20

If a good has a negative income elasticity of demand,this indicates that the good is:

Accepted Answer

A)  a substitute with another good. 
B)  a complement with another good. 
C)  inferior. 
D)  normal.

Exam 4: Elasticity: The Responsiveness of Demand and Supply

A demand curve which is represents perfectly inelastic demand,and a demand curve which is represents inelastic demand.