Question 1

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

Accepted Answer

A)  relatively, but not perfectly, elastic. 
B)  unit-elastic. 
C)  completely inelastic. 
D)  relatively, but not perfectly, inelastic.

Question 2

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 3

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and
at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the price of gasoline is $3.50 per gallon,the quantity of gasoline demanded is 150 billion gallons per year,the price elasticity of demand for gasoline is -0.06,and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon,which increases the price of gasoline by $0.75 per gallon.How much revenue does the federal government receive from the tax?

Accepted Answer

A)  $95.44 billion 
B)  $111.20 billion 
C)  $148.27 billion 
D)  $161.61 billion

Question 5

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 are 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 6

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a.Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair coloring product.
b.A new Ford Fusion or a tank of gas for your current car.
c.A Seiko watch or watches in general.

Accepted Answer

The answer of For each pair of items below determine...

Question 7

Last year,Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000.This year,his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes.All else constant,Sefton's income elasticity of demand for potatoes is

Accepted Answer

A)  negative, so Sefton considers potatoes to be an inferior good. 
B)  positive, so Sefton considers potatoes to be an inferior good. 
C)  positive, so Sefton considers potatoes to be a normal good and a necessity. 
D)  negative, so Sefton considers potatoes to be a normal good.

Question 8

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 9

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0,and the good is ________ good.

Accepted Answer

A)  greater; an inferior 
B)  less; a normal 
C)  less; an inferior 
D)  greater; a normal

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is true?

Accepted Answer

A)  The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. 
B)  The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. 
C)  The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly. 
D)  Over short periods of time increases in the demand for oil are greater than increases in the supply of oil. Over the long run increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

Question 14

Figure 6-8 
-Refer to Figure 6-8.Identify the two goods which are complements.

Accepted Answer

A)  Good X and Good Y 
B)  Good Y and Good Z 
C)  Good X and Good Z 
D)  It is not possible to distinguish any relationship among the goods.

Question 15

Since 1950 there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?

Accepted Answer

A)  The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is greater than 1. 
B)  The absolute value of the price elasticity of demand for wheat is greater than 1 and wheat is a close substitute for other food products. 
C)  The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is low. 
D)  The income elasticity of demand for wheat is high and wheat is an inferior good.

Question 16

A perfectly elastic demand curve is

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  curvilinear. 
D)  upward sloping.

Question 17

For people who live near a bus route,a subway station,or a commuter rail line,public transportation provides a substitute to driving their own cars.So,for these people,the cross-price elasticity of demand between gasoline and public transportation is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  infinity.

Question 18

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

Accepted Answer

A)  the price elasticity of demand for teapots is greater than 1 in absolute value. 
B)  the demand for teapots is unit-elastic. 
C)  the price elasticity of demand for teapots is equal to zero. 
D)  the price elasticity of demand for teapots is less than 1 in absolute value.

Question 19

According to a study of the U.S.demand for alcoholic beverages,the price elasticity of demand for beer is -0.30.Which of the following could explain why the price elasticity of demand for beer is low?

Accepted Answer

A)  Beer is an inferior alcoholic beverage. 
B)  More and more people are switching to wine and cocktails rather than beer. 
C)  The price of beer is relatively low and for many people it is a habit forming product. 
D)  There are only a few major suppliers of beer.

Question 20

Last year,Joan bought 50 pounds of hamburger when her household income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is

Accepted Answer

A)  positive, so Joan considers hamburger to be an inferior good. 
B)  negative, so Joan considers hamburger to be an inferior good. 
C)  positive, so Joan considers hamburger to be a normal good and a necessity. 
D)  negative, so Joan considers hamburger to be a normal good.

Exam 6: Elasticity: The Responsiveness of Demand and Supply

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

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

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

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 are true?

Last year,Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000.This year,his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes.All else constant,Sefton's income elasticity of demand for potatoes is

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

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is than 0,and the good is good.

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

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

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

Which of the following statements is true?

Figure 6-8 -Refer to Figure 6-8.Identify the two goods which are complements.

Since 1950 there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?

A perfectly elastic demand curve is

For people who live near a bus route,a subway station,or a commuter rail line,public transportation provides a substitute to driving their own cars.So,for these people,the cross-price elasticity of demand between gasoline and public transportation is

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

According to a study of the U.S.demand for alcoholic beverages,the price elasticity of demand for beer is -0.30.Which of the following could explain why the price elasticity of demand for beer is low?

Last year,Joan bought 50 pounds of hamburger when her household income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is