Question 1

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is

Accepted Answer

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

Question 2

If the demand for iPods is price elastic,then

Accepted Answer

A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). 
B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value). 
C) the percentage change in quantity demanded is equal to the percentage change in price. 
D) quantity demanded is not responsive to changes in price.

Question 3

Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to 'feed his muscles' every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?

Accepted Answer

A) It is elastic. 
B) It is perfectly elastic. 
C) It is perfectly inelastic. 
D) The price elasticity coefficient is 0.

Question 4

Which of the following products comes closest to having a perfectly inelastic demand?

Accepted Answer

A) petrol 
B) cholesterol medication in general 
C) iPhones 
D) bus rides

Question 5

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities ?

Accepted Answer

The answer of Explain the concepts of cross-price elasticity of...

Question 6

The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. 
B) The absolute value of the elasticity of demand ranges from zero to one. 
C) Demand is more elastic in the long run than it is in the short run. 
D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Question 9

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Accepted Answer

A) True 
 B)False

Question 10

When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent,and the sale of dips (like salsa and bean dip)fell 8 per cent.This set of facts indicates that

Accepted Answer

A) the cross-price elasticity between tortilla chips and dips is 0.8,so the two are substitutes. 
B) the cross-price elasticity between tortilla chips and dips is -0.4,so the two are complements. 
C) the cross-price elasticity between tortilla chips and dips is -0.8,so the two are complements. 
D) the cross-price elasticity between tortilla chips and dips is 0.4,so the two are substitutes.

Question 11

You are the manager of a theatre.At present the theatre charges the same admission price of $8 to all customers,regardless of age.You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults.You tell your supervisor that your proposal is likely to increase revenues.What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.

Accepted Answer

The answer of You are the manager of a theatre.At...

Question 12

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Accepted Answer

The answer of When is demand perfectly elastic? When is...

Question 13

If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

Accepted Answer

A) True 
 B)False

Question 14

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

Accepted Answer

A) The elasticity coefficient is likely to be very high,and supply is inelastic. 
B) The elasticity coefficient is likely to be close to zero,and supply is perfectly elastic. 
C) The elasticity coefficient is likely to be low,and supply is highly inelastic. 
D) The elasticity coefficient is likely to be low,and supply is highly elastic.

Question 15

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Accepted Answer

The answer of List the five key determinants of price...

Question 16

The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

Accepted Answer

A) True 
 B)False

Question 17

Price elasticity of demand measures

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 18

If a 5 per cent increase in income leads to a 10 per cent decrease in quantity demanded for a product this product is

Accepted Answer

A) an income elastic good. 
B) an inferior good. 
C) a necessity. 
D) a luxury good.

Question 19

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 20

Figure 4-7 
-Refer to Figure 4-7.A perfectly elastic supply curve is shown in

Accepted Answer

A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D.

Exam 4: Elasticity: the Responsiveness of Demand and Supply

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is

If the demand for iPods is price elastic,then

Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to 'feed his muscles' every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?

Which of the following products comes closest to having a perfectly inelastic demand?

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities ?

The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

The price elasticity of supply measures

Which of the following statements about the price elasticity of demand is correct?

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent,and the sale of dips (like salsa and bean dip) fell 8 per cent.This set of facts indicates that

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

Price elasticity of demand measures

If a 5 per cent increase in income leads to a 10 per cent decrease in quantity demanded for a product this product is

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Figure 4-7 -Refer to Figure 4-7.A perfectly elastic supply curve is shown in