Deck 6: Elasticity

Question 1

When the price of pencils decreases from $3 to $1,the quantity demanded increases from 100 to 200 pencils.By the midpoint method,the price elasticity of demand equals:

A)0.17.
B)0.5.
C)0.67.
D)1.5.

Answer 1

0.67.

Question 2

If the price of a good increases by 15% and quantity demanded changes by 20%,then the price elasticity of demand is equal to:

A)0.75.
B)approximately 0.33.
C)approximately 1.33.
D)1.

Answer 2

approximately 1.33.

Question 3

The price elasticity of demand is computed as the percentage change in the _____ divided by the percentage change in _____.

A)quantity demanded;the quantity supplied
B)price;the quantity demanded
C)quantity demanded;income
D)quantity demanded;the price

Answer 3

quantity demanded;the price

Question 4

If the price of burritos increases from $4 to $6 and customers decrease their consumption from 20 to 10 burritos,what is the price elasticity of demand (by the midpoint method)?

A)1.67
B)0.67
C)3
D)2

Question 5

Suppose at $10 the quantity demanded is 100.When the price falls to $8,the quantity demanded increases to 130.The price elasticity of demand (using the midpoint formula)between $10 and $8 is approximately:

A)1.17.
B)1.50.
C)0.85.
D)1.00.

Question 6

If the price of tacos increases from $1 to $2 and customers decrease their consumption from 10 tacos to 8 tacos,what is the price elasticity of demand (by the midpoint method)?

A)1.5
B)1
C)0.33
D)0.5

Question 7

The price elasticity of demand can be found by:

A)examining only the slope of the demand curve.
B)measuring absolute changes in price and quantity demanded.
C)comparing the percentage change in quantity demanded to the percentage change in price.
D)knowing that when price changes,quantity demanded goes in the opposite direction.

Question 8

The price elasticity of demand measures the:

A)responsiveness of the change in quantity demanded to a change in price.
B)change in price versus a change in quantity demanded.
C)responsiveness of the change in the slope of the demand curve to a change in price.
D)change in the slope of the demand curve versus a change in the quantity demanded.

Question 9

When the price goes down,the quantity demanded goes up.The price elasticity of demand measures:

A)how much the price goes down.
B)how much the equilibrium price goes up.
C)the responsiveness of the price change to an income change.
D)the responsiveness of the quantity change to the price change.

Question 10

If the price of a good increases by 20% and the quantity demanded changes by 15%,then the price elasticity of demand is equal to:

A)0.75.
B)approximately 0.33.
C)approximately 1.33.
D)1.

Question 11

Egg producers know that the price elasticity of demand for eggs is 0.1.If they want to increase sales by 5%,they will have to lower price by:

A)0.1%.
B)1%.
C)5%.
D)50%.

Question 12

The price elasticity of demand measures the responsiveness of the change in the:

A)quantity demanded to a change in the price.
B)price to a change in the quantity demanded.
C)slope of the demand curve to a change in the price.
D)slope of the demand curve to a change in the quantity demanded.

Question 13

The ratio of the percentage change in quantity demanded to the percentage change in price is the _____ elasticity of demand.

A)price
B)quantity
C)income
D)cross-price

Question 14

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%.The price elasticity of demand is equal to _____,and demand is described as _____.

A)0.2;inelastic
B)5;inelastic
C)0.2;elastic
D)5;elastic

Question 15

The price elasticity of demand measures the:

A)responsiveness of quantity demanded to a change in price.
B)responsiveness of price to a change in quantity demanded.
C)extent to which prices are flexible and respond to market forces.
D)responsiveness of demand when price is held constant and demand increases or decreases.

Question 16

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $2.50 and $2.25?

A)9
B)19
C)119
D)0.5

Question 17

If the estimated price elasticity of demand for foreign travel is 4:

A)a 20% decrease in the price of foreign travel will increase quantity demanded by 80%.
B)the demand for foreign travel is inelastic.
C)a 10% increase in the price of foreign travel will increase quantity demanded by 40%.
D)a 20% increase in the price of foreign travel will increase quantity demanded by 80%.

Question 18

The price elasticity of demand is measured by _____ the percentage change in _____ the percentage change in _____.

A)dividing;price by;quantity demanded
B)dividing;quantity demanded by;price
C)subtracting;price from;quantity demanded
D)adding;price to;quantity demanded

Question 19

For a normal demand curve,the price elasticity of demand will:

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

Question 20

Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day.Demand for gasoline in Orlando is:

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

Question 21

Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue on the assumption that consumer demand is:

A)steady in its price elasticity as departure time approaches.
B)less price-elastic as departure time approaches.
C)always unit elastic.
D)very sensitive to price changes as the time of departure approaches.

Question 22

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.25 and $1.00?

A)0.60
B)0.82
C)1.00
D)1.60

Question 23

If demand is elastic,the _____ effect dominates the _____ effect,and a(n)_____ in price will cause total revenue to rise.

A)price;quantity;decrease
B)price;quantity;increase
C)quantity;price;increase.
D)quantity;price;decrease

Question 24

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price.If the demand for beef is perfectly elastic,this rancher's quantity demanded will:

A)fall to 0.
B)not change.
C)fall slightly.
D)increase slightly.

Question 25

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $2.00 and $1.75?

A)2.33
B)3.00
C)4.00
D)0.125

Question 26

When the price of chocolate-covered peanuts increases from $1.55 to $2.00,the quantity demanded decreases from 220 to 180.If the price is $1.55,total revenue is _____,and if the price is $2.00,total revenue is _____.

A)$360;$440
B)$341;$279
C)$440;$279
D)$341;$360

Question 27

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $0.75 and $0.50?

A)0.25
B)0.33
C)0.43
D)0.52

Question 28

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95,the quantity demanded increases from 190 bags to 215 bags.If the price is $1.10,total revenue is _____,and if the price is $0.95,total revenue is _____.

A)$209;$204.25
B)$209;$236.50
C)$236.50;$209
D)$180.50;$209

Question 29

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.00 and $0.75?

A)0.54
B)0.66
C)0.75
D)1.00

Question 30

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama.To increase revenue,fishing lure manufacturers should:

A)lower prices in each state.
B)raise prices in each state.
C)lower prices in South Carolina and raise prices in Alabama.
D)leave prices unchanged in South Carolina and raise prices in Alabama.

Question 31

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95,the quantity demanded increases from 190 bags to 215 bags.In this price range,the demand for chocolate covered peanuts is _____,and total revenue will _____ when price decreases.

A)elastic;increase
B)elastic;decrease
C)inelastic;increase
D)inelastic;decrease

Question 32

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.50 and $1.25?

A)1.00
B)1.22
C)1.50
D)1.75

Question 33

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $2.25 and $2.00?

A)4.00
B)5.67
C)9.00
D)17.60

Question 34

Suppose the price of barley increases by 16.53%.If breweries buy 3.28% less barley after the price increase,the total revenue for barley producers will _____ because the _____ effect is greater than the _____ effect.

A)decrease;quantity;price
B)increase;price;quantity
C)not change;quantity;price
D)increase;quantity;price

Question 35

The university president believes that increasing student tuition by 5% will increase revenues.If the president is correct that revenues will increase,then the tuition increase will _____ the number of students enrolling by _____%.

A)reduce;less than 5
B)reduce;more than 5
C)increase;exactly 5
D)increase;less than 5

Question 36

Use the following to answer question:
(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.75 and $1.50?

A)0.42
B)1.50
C)1.86
D)0.08

Question 37

Total revenue is:

A)total sales less total cost.
B)the price of a good times the quantity of the good that is sold.
C)the price effect times the quantity effect.
D)the price of a good divided by the amount of the good sold.

Question 38

The university hopes to raise more revenue by increasing parking fees.This plan will work only if:

A)the price effect is larger than the quantity effect.
B)the price effect is smaller than the quantity effect.
C)the price effect and quantity effect are the same.
D)there is no price or quantity effect.

Question 39

When the price of chocolate-covered peanuts increases from $1.55 to $2.00,the quantity demanded decreases from 220 to 160.In this price range,the demand for chocolate-covered peanuts is _____,and total revenue will _____ when the price increases.

A)elastic;increase
B)elastic;decrease
C)inelastic;increase
D)inelastic;decrease

Question 40

Sonik,a wireless phone company,tested the effect of a price reduction for text messaging.It lowered prices from $0.08 to $0.04 per message and found that the number of messages sent tripled.This means that the:

A)demand for text messaging is inelastic in this price range.
B)demand curve for text messaging shifted to the right.
C)supply curve for text messaging shifted to the left.
D)demand for text messaging is elastic in this price range.

Question 41

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

A)price inelastic.
B)price elastic.
C)price unit-elastic.
D)zero elastic.

Question 42

Use the following to answer question:
(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.The change in total revenue resulting from a change in price from P to T suggests that demand is:

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

Question 43

The demand for agricultural output is price inelastic.This means that if farmers,taken collectively,have a bumper crop,they will have _____ prices,_____ quantities sold,and _____ incomes.

A)lower;greater;lower
B)lower;greater;higher
C)lower;lower;lower
D)higher;higher;higher

Question 44

If an increase in the price of cotton increases total revenue,then the price effect is _____ the quantity effect.

A)equal to
B)stronger than
C)weaker than
D)not comparable to

Question 45

If a university decreases the price of tickets to football games to collect more revenue,it is assuming that the demand for tickets is:

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

Question 46

If a 20% price increase generates a 20% decrease in quantity demanded,then this is a(n)_____ response.

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

Question 47

The price elasticity of demand for lettuce has been estimated to be 2.58.If an insect infestation destroys 10% of the nation's lettuce crop,how will that affect total revenue from lettuce,all other things unchanged?

A)Total revenue will remain unchanged.
B)Total revenue will fall.
C)Total revenue will rise.
D)The information is insufficient to answer the question.

Question 48

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22.If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop,how will that affect total revenue from fresh tomatoes,all other things unchanged?

A)Total revenue will remain unchanged.
B)Total revenue will fall.
C)Total revenue will rise.
D)The information is insufficient to answer the question.

Question 49

If the demand for golf is unit-price elastic and your local public golf course increases the greens fees for using the course,you expect:

A)a decrease in total revenue received by the course.
B)an increase in total revenue received by the course.
C)a decrease in the amount of golf played on the course.
D)no change in the amount of golf played on the course.

Question 50

After a price decrease,the quantity effect tends to:

A)decrease total revenue.
B)increase total revenue.
C)make the price effect stronger.
D)make the price effect weaker.

Question 51

Suppose the price elasticity of demand for oranges is 1.8.If a fall frost destroys one-third of the nation's orange crop,how will that affect total revenue from oranges,all other things unchanged?

A)Total revenue will rise.
B)Total revenue will fall.
C)Total revenue will remain unchanged.
D)The information is insufficient to answer the question.

Question 52

Use the following to answer question:
(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.Total revenue at point V equals the:

A)area 0TVN.
B)area 0PSVN.
C)distance 0T.
D)distance NV.

Question 53

Demand for vegetables at a small farmers' market is steady,but the supply of vegetables has decreased because of a drought.This is good news for farmers if demand is _____ and the _____ effect outweighs the _____ effect.

A)inelastic;price;quantity
B)elastic;price;quantity
C)inelastic;output;price
D)elastic;output;price

Question 54

Which statement is NOT true regarding a price-elastic demand curve?

A)Total revenue increases when the price falls.
B)The absolute value of the price elasticity is a fraction greater than 0 but less than 1.
C)The absolute value of the price elasticity is greater than 1.
D)The percent changes in the quantity demanded exceed the percent changes in the price for any small change in price.

Question 55

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

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

Question 56

In the market for computers,if the demand curve is elastic and the price of a computer decreases,we expect total revenue to _____.If the demand curve is inelastic and the price of a computer decreases,we expect total revenue to _____.

A)increase;decrease
B)increase;increase
C)decrease;increase
D)decrease;decrease

Question 57

There is one gas station in a small rural town.The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price.If he is correct in this assertion,the demand curve for gas at his station must be _____,with a price elasticity of _____.

A)vertical;zero
B)vertical;infinity
C)horizontal;zero
D)horizontal;infinity

Question 58

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course,you expect:

A)a decrease in total revenue received by the course.
B)an increase in total revenue received by the course.
C)an increase in the amount of golf played on the course.
D)no change in the amount of golf played on the course.

Question 59

The price elasticity of demand for gasoline in the short run has been estimated to be 0.4.If a war in the Middle East causes the price of oil (from which gasoline is made)to increase,how will that affect total revenue from gasoline in the short run,all other things unchanged?

A)Quantity demanded will stay the same;total revenue will fall.
B)Quantity demanded will decrease;total revenue will rise.
C)Total revenue will remain unchanged.
D)Quantity demanded will not change;total revenue will rise.

Question 60

Use the following to answer question:
(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.Total revenue at point S equals the:

A)distance 0P.
B)distance MS.
C)area 0TUM.
D)area 0PSM.

Question 61

Use the following to answer question:
(Figure: Demand Curves)Use Figure: Demand Curves.Which graph shows a perfectly inelastic demand curve?

A)A
B)B
C)C
D)D

Question 62

Use the following to answer question:
(Figure: Estimating Price Elasticity)Use Figure: Estimating Price Elasticity.Between the two prices,P₁ and P₂,which demand curve has the HIGHEST price elasticity?

A)D₁
B)D₂
C)D₃
D)D₄

Question 63

If the price elasticity of demand is found to be 6,then demand is:

A)price-inelastic.
B)price-elastic.
C)price unit-elastic.
D)horizontal.

Question 64

When the percentage change in quantity demanded is larger than the percentage change in price,demand is said to be:

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

Question 65

If the quantity demanded of agricultural output is very unresponsive to a fall in price,the demand for agricultural output is:

A)price-elastic.
B)price-inelastic.
C)positively sloped.
D)horizontal.

Question 66

Yovanka has diabetes,and she will pay any amount of money for insulin.What is the BEST characterization of Yovanka's demand for insulin?

A)price-inelastic
B)price-elastic
C)perfectly price-inelastic
D)perfectly price-elastic

Question 67

If total revenue goes down when the price falls,demand is said to:

A)be price-inelastic.
B)be price unit-elastic.
C)be price-elastic.
D)have positive price elasticity.

Question 68

If the price elasticity of demand is calculated to be 0.75,then demand is:

A)price-inelastic.
B)price-elastic.
C)price unit-elastic.
D)positively sloped.

Question 69

When demand is _____,a rise in price leads to a(n)_____ in total revenue.

A)perfectly inelastic;decrease
B)perfectly elastic;increase
C)inelastic;increase
D)elastic;increase

Question 70

If the price of a good increases by 15% and the quantity demanded falls by 20%,demand is:

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

Question 71

The price elasticity of demand along a demand curve with a constant slope:

A)is equal to the slope.
B)is greater than the slope.
C)is less than the slope.
D)decreases in absolute value as quantity demanded rises.

Question 72

If demand _____ and the University of Michigan increases the price of football tickets,revenues will increase.

A)is price-inelastic
B)is price-elastic
C)has price elasticity equal to 1
D)is perfectly price-elastic

Question 73

Use the following to answer question:
(Figure: Estimating Price Elasticity)Use Figure: Estimating Price Elasticity.Between the two prices,P₁ and P₂,which demand curve has the LOWEST price elasticity?

A)D₁
B)D₂
C)D₃
D)D₄

Question 74

If total revenue goes up when the price falls,demand is said to:

A)be price-inelastic.
B)be price unit-elastic.
C)be price-elastic.
D)have positive price elasticity.

Question 75

On a linear demand curve:

A)demand is elastic at high prices.
B)demand is inelastic at high prices.
C)elasticity is the same at all points on the demand curve.
D)demand is elastic at low prices.

Question 76

Suppose that an increase in the price of a good leads to an increase in total revenue.Ignoring other factors (like supply),at its current price the good must be:

A)price-inelastic.
B)price-elastic.
C)perfectly price-elastic.
D)inferior.

Question 77

A linear demand curve has:

A)a constant price elasticity of demand.
B)a price elasticity of demand equal to one at all prices.
C)a calculated price elasticity of demand that is positive.
D)both elastic and inelastic price elasticities of demand.

Question 78

Use the following to answer question:
(Figure: Demand Curves)Use Figure: Demand Curves.Which graph shows a perfectly elastic demand curve?

A)A
B)B
C)C
D)D

Question 79

Total revenue will decrease if the price goes _____ and demand is _____.

A)up;perfectly price-inelastic
B)up;price-inelastic
C)down;price-elastic
D)up;price-elastic

Question 80

The price elasticity of demand along a demand curve with a constant slope:

A)is equal to the slope.
B)is greater than the slope.
C)is less than the slope.
D)increases in absolute value as the price rises.