Question 1

Figure 4-4 
-Refer to Figure 4-4.Which of the following statements is true about the price elasticity of demand?

Accepted Answer

A) The elasticity coefficient is constant along the demand curve. 
B) The elastic portion of a straight-line downward-sloping demand curve corresponds to the segment above the midpoint. 
C) The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D) At the midpoint of the demand curve,the elasticity coefficient is zero.

Question 2

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

Accepted Answer

A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 3

At a price of $8 per dozen,Chuy sells 40 dozen homemade tamales per week.When he raised his price to $12 per dozen,he still sold 40 dozen per week.Based on this information,the demand for his tamales is

Accepted Answer

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

Question 4

Consider the following types of demand curves:
A.a vertical demand curve
B.a horizontal demand curve
C.a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Accepted Answer

A) a only 
B) b only 
C) a and b only 
D) a,b,and c

Question 5

A supply curve that is vertical

Accepted Answer

A) is perfectly elastic. 
B) is perfectly inelastic. 
C) is impossible. 
D) has an elasticity equal to 1.

Question 6

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

Accepted Answer

A) 0.625. 
B) 6%. 
C) 1.6. 
D) 1.6%.

Question 7

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 8

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?

Accepted Answer

A) 60 per cent 
B) 15 per cent 
C) 6.7 per cent 
D) impossible to determine without additional information

Question 9

Necessities tend to have more inelastic demands than luxuries.

Accepted Answer

A) True 
 B)False

Question 10

If a firm wanted to know whether the demand for its product was elastic,unit-elastic,or inelastic,then the firm could

Accepted Answer

A) survey competitors and ask them what they think demand elasticity is for the product. 
B) talk to its customers. 
C) change price a little bit and observe what happens to total revenue. 
D) not do anything as there is no way to find an elasticity value.

Question 11

In recent years,the prices of new domestically produced cars have been falling.Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel.This information suggests that the cross-price elasticity between new cars and used cars,and the cross-price elasticity between new cars and bus travel are negative.

Accepted Answer

A) True 
 B)False

Question 12

Figure 4-8 
-Refer to Figure 4-8.What is the value of the price elasticity of supply between g and h?

Accepted Answer

A) 20 
B) 0.5 
C) 2 
D) 0.02

Question 13

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03.This means that

Accepted Answer

A) beer and wine are substitutes and wine is an inferior good. 
B) beer and wine are complements and wine is a luxury good. 
C) beer and wine are substitutes and wine is a luxury good. 
D) beer and wine are complements and wine is an inferior good.

Question 14

According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

Accepted Answer

A) The toothpaste industry is highly competitive. 
B) Toothpaste is relatively inexpensive. 
C) Toothpaste is heavily endorsed by dentists. 
D) There are few close substitutes for toothpaste.

Question 15

Economists use the concept of ________ to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price.

Accepted Answer

A) slope 
B) efficiency 
C) relativity 
D) elasticity

Question 16

Linesha,a university student working part-time,receives a wage increase.An avid movie buff,she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,

Accepted Answer

A) DVDs and Blu-ray discs are substitutes. 
B) Blu-ray discs are normal goods and DVDs are inferior goods. 
C) DVDs and Blu-ray discs are normal goods. 
D) the cross-price elasticity between DVDs and Blu-ray discs is negative.

Question 17

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

Accepted Answer

A) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. 
B) The slope is constant,but the price elasticity of demand is not constant at all points along the demand curve for sunblock. 
C) The slope is not constant,but the price elasticity of demand is constant at all points along the demand curve for sunblock. 
D) The slope of the demand curve for sunblock is constant and equal to zero;demand is perfectly inelastic.

Question 18

The larger the share of a good in a consumer's budget,holding everything else constant,the

Accepted Answer

A) more price elastic is a consumer's demand. 
B) more vertical is a consumer's demand curve. 
C) more price inelastic is a consumer's demand. 
D) more unit-elastic is a consumer's demand.

Question 19

Consider the following pairs of items:
A.shampoo and conditioner
B.iPhones and earbuds
C.a laptop computer and a desktop computer
D.beef and pork
E.air-travel and weed killer
Which of the pairs listed will have a positive cross-price elasticity?

Accepted Answer

A) a and b only 
B) c and d only 
C) e only 
D) a,b,and c only

Question 20

Calculate the income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce.

Accepted Answer

A) -0.66 
B) 0.5 
C) 1.5 
D) 2

Exam 4: Elasticity: the Responsiveness of Demand and Supply

Figure 4-4 -Refer to Figure 4-4.Which of the following statements is true about the price elasticity of demand?