Deck 4: Elasticity

Question 1

When the price elasticity of demand is 2 and the price increases by 10 percent,the quantity demanded

A)decreases by 2 percent.
B)decreases by 20 percent.
C)decreases by 5 percent.
D)increases by 2 percent.
E)increases by 20 percent.

Answer 1

decreases by 20 percent.

Question 2

Which one of the following illustrates an inelastic demand?

A)A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.
B)A 10 percent rise in price leads to a 20 percent decrease in quantity demanded.
C)A price elasticity of demand equal to infinity.
D)A price elasticity of demand equal to 1.0.
E)A price elasticity of demand equal to 2.0.

Answer 2

A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.

Question 3

If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded,the price elasticity of demand is

A)0.8.
B)1.25.
C)8.
D)0.125.
E)80.

Answer 3

0.8.

Question 4

The demand for good A is unit elastic if

A)a 5 percent fall in the price of A results in an infinite increase in the quantity of A demanded.
B)a 5 percent rise in the price of A results in a 10 percent decrease in the quantity of A demanded.
C)any increase in the price of A results in a 1 percent decrease in the quantity of A demanded.
D)a 5 percent rise in the price of A results in no change in the quantity of A demanded.
E)a 5 percent rise in the price of A results in a 5 percent decrease in the quantity of A demanded.

Question 5

If a large percentage drop in the price level results in a small percentage increase in the quantity demanded,

A)demand is inelastic.
B)demand is elastic.
C)demand is unit elastic.
D)the price elasticity of demand is close to infinity.
E)the price elasticity of demand is zero.

Question 6

If a 12 percent fall in price results in an 8 percent increase in quantity demanded,the price elasticity of demand equals

A)0.96.
B)0.12.
C)0.67.
D)1.5.
E)0.8.

Question 7

If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity demanded,the demand curve for this good

A)is vertical.
B)is horizontal.
C)has slope equal to -1.
D)is a straight line with slope equal to -10.
E)is downward sloping and bowed toward the origin.

Question 8

If the demand curve for a good is a horizontal line,then the good has

A)zero income elasticity.
B)price elasticity of demand equal to zero.
C)a perfectly elastic demand.
D)a price elasticity of demand that is likely to rise in the short run.
E)a price elasticity of demand that is likely to fall in the short run.

Question 9

The price elasticity of demand is a units-free measure of the responsiveness of the ________ when all other influences on buying plans remain the same.

A)quantity demanded of a good to a change in the price of a substitute or complement
B)quantity demanded of a good to a change in income
C)quantity demanded of a good to a change in its price
D)price to a change in the quantity demanded of a good
E)quantity demanded of a good to a change in supply

Question 10

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the

A)cross elasticity of demand.
B)income elasticity of demand.
C)substitute elasticity of demand.
D)price elasticity of demand.
E)elasticity of supply.

Question 11

The price of good A falls by 10 percent and quantity of good A demanded does not change.The demand for good A is

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

Question 12

When the price of a box of cereal is $5,the quantity demanded is 800 boxes.When the price of a box of cereal is $7,the quantity demanded is 400 boxes.Calculate the price elasticity of demand when the price of a box of cereal is $6.

A)0.5
B)200
C)0.005
D)1.0
E)2.0

Question 13

The price of an apple falls by 5 percent and quantity of apples demanded increases by 6 percent.The demand for apples is

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

Question 14

When the price of gas is $1.00 a litre,the quantity demanded is 1,750 litres.When the price of gas is $2.00 a litre,the quantity demanded is 1,250 litres.Calculate the price elasticity of demand when the price is $1.50 a litre.

A)2.0
B)5.0
C)0.5
D)20
E)1.5

Question 15

The price of a plum falls by 8 percent and quantity of plums demanded increases by 4 percent.The demand for plums is

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

Question 16

Demand is inelastic if

A)a small change in price results in a large change in quantity demanded.
B)the quantity demanded is very responsive to a change in price.
C)the price elasticity of demand is 0.2.
D)the price does not change when supply increases.
E)a 10 percent change in price results in a 1 percent change in the quantity supplied.

Question 17

The price of a bus ride rises by 3 percent and quantity of oranges demanded decreases by 3 percent.The demand for bus rides is

A)inelastic.
B)elastic.
C)perfectly inelastic.
D)perfect elastic.
E)unit elastic.

Question 18

A unit elastic demand

A)means that the magnitude of the ratio of a change in quantity demanded to a change in price is equal to 1.
B)means that the magnitude of the ratio of a percentage change in quantity demanded to a percentage change in price is equal to 1.
C)means that the magnitude of the ratio of a change in price to a change in quantity demanded is equal to 1.
D)is illustrated by a horizontal demand curve.
E)is illustrated by a vertical demand curve.

Question 19

Which one of the following illustrates an elastic demand?

A)A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.
B)A 10 percent rise in price leads to a 20 percent decrease in quantity demanded.
C)A price elasticity of demand equal to 0.2.
D)A price elasticity of demand equal to 1.0.
E)A price elasticity of demand equal to zero.

Question 20

When the price of a pair of gloves is $21,the quantity demanded is 600 pairs.When the price of a pair of gloves is $15,the quantity demanded is 1,000 pairs.Calculate the price elasticity of demand when the price of a pair of gloves is $18.

A)1.5
B)0.67
C)66.7
D)0.015
E)1.0

Question 21

When a good has a vertical demand curve,the price elasticity of demand for the good is

A)zero.
B)greater than zero but less than 1.
C)1.
D)greater than 1.
E)negative.

Question 22

Which one of the following situations gives a price elasticity of demand of 5.0? A 10 percent rise in price is accompanied by a

A)2 percent increase in quantity demanded.
B)5 percent decrease in quantity demanded.
C)2 percent decrease in quantity demanded.
D)50 percent decrease in quantity demanded.
E)50 percent increase in quantity demanded.

Question 23

Use the figure below to answer the following questions. Figure 4.1.2
Figure 4.1.2 illustrates a linear demand curve.If the price falls from $13 to $11,

A)total revenue increases.
B)total revenue decreases.
C)total revenue remains unchanged.
D)total revenue initially increases then decreases.
E)total revenue initially decreases then increases.

Question 24

If the demand for salmon in Cape Breton,Nova Scotia,is unit elastic,the price elasticity of demand for salmon equals

A)1.0.
B)100.0.
C)0.10.
D)zero.
E)10.0.

Question 25

The quantity of apples demanded decreases by 8 percent when the price of an apple rises by 8 percent.The demand for apples is

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

Question 26

Suppose that the price elasticity of demand for bottled water in Sackville,New Brunswick is 1.5,and the price elasticity of demand for bottled water in Prince Albert,Saskatchewan is 0.8.The demand for bottled water in Sackville is ________ and demand for bottled water in Prince Albert is ________.

A)unit elastic;unit elastic
B)perfectly elastic;inelastic
C)inelastic;elastic
D)elastic;inelastic
E)elastic;unit elastic

Question 27

For which one of the following is demand likely to be most price inelastic?

A)diamonds
B)insulin for a diabetic
C)potatoes
D)gasoline
E)books

Question 28

For which one of the following will demand be the most price elastic?

A)daily newspapers
B)Ontario newspapers
C)Toronto newspapers
D)the Toronto Star
E)Each of the above will exhibit the same price elasticity of demand.

Question 29

Suppose the quantity of root beer demanded decreases from 105,000 litres per week to 95,000 litres per week when the price rises by 5 percent.The price elasticity of demand is

A)2.0.
B)0.5.
C)10.
D)0.02.
E)50.

Question 30

Demand will be more elastic the

A)lower the price of the good.
B)greater the quantity demanded of the good.
C)longer the passage of time after a price increase.
D)fewer substitutes for the good that are available.
E)smaller the fraction of income spent on the good.

Question 31

Use the table below to answer the following questions.
Table 4.1.1
Demand schedule for good A.
Refer to Table 4.1.1.Demand is unit elastic when the price is

A)$5.00.
B)$9.00.
C)$5.50.
D)$4.50.
E)$3.50.

Question 32

Use the figure below to answer the following question. Figure 4.1.1
Figure 4.1.1 illustrates a linear demand curve.Comparing the price elasticity when price is $3 with the price elasticity when price is $8,we can conclude that

A)demand is more elastic when price is $8.
B)demand is more elastic when price is $3.
C)the price elasticity of demand is equal when price is $8 and when price is $3.
D)demand is elastic when price is $8 and unit elastic when price is $3.
E)demand is inelastic when price is $3 and unit elastic when price is $8.

Question 33

For which one of the following will demand be the most price inelastic?

A)milk
B)Happy Cow brand milk
C)Happy Cow brand milk in Regina
D)Happy Cow brand milk at Ralph's Grocery Store in Regina
E)All of the above will exhibit the same price elasticity of demand.

Question 34

Use the figure below to answer the following questions. Figure 4.1.2
Figure 4.1.2 illustrates a linear demand curve.If the price falls from $4 to $2,

A)total revenue increases.
B)total revenue decreases.
C)total revenue remains unchanged.
D)the quantity demanded increases by more than 10 percent.
E)the percentage change in quantity demanded is more than the percentage change in price.

Question 35

Demand will be more inelastic the

A)lower the price of the good.
B)smaller the quantity demanded of the good.
C)longer the passage of time after a price increase.
D)fewer substitutes for the good that are available.
E)larger the fraction of income spent on the good.

Question 36

Suppose the Lethbridge Computer Company decides to increase the quantity of computers it sells by 6 percent.If the price elasticity of demand is 3.0,the company must

A)raise the price of a computer by 2.0 percent.
B)raise the price of a computer by 0.5 percent.
C)lower the price of a computer by 1.8 percent.
D)lower the price of a computer by 2.0 percent.
E)lower the price of a computer by 0.5 percent.

Question 37

Suppose the government of Nova Scotia wants to reduce the consumption of electricity by 5 percent.The price elasticity of demand for electricity is 0.40.You advise the Nova Scotia government to

A)raise the price of electricity by 12.5 percent.
B)raise the price of electricity by 2 percent.
C)lower the price of electricity by 12.5 percent.
D)raise the price of electricity by 8 percent.
E)lower the price of electricity by 2 percent.

Question 38

Use the table below to answer the following questions.
Table 4.1.1
Demand schedule for good A.
Refer to Table 4.1.1.The price elasticity of demand when the price is $6 is

A)1.0.
B)2.0.
C)2.6.
D)0.5.
E)2,000.

Question 39

At a price of $15,Jack's quantity demanded of good A is the same as when the price rises to $16.Jack's demand for good A is

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

Question 40

A given percentage rise in the price of a good is likely to result in a larger percentage decrease in the quantity of the good demanded

A)the shorter the passage of time since the price change.
B)the larger the proportion of income spent on it.
C)the more difficult it is to obtain good substitutes.
D)the lower the price.
E)all of the above.

Question 41

If the price elasticity of demand is 2,then a 1 percent fall in price

A)doubles the quantity demanded.
B)decreases the quantity demanded by half.
C)increases the quantity demanded by 2 percent.
D)decreases the quantity demanded by 2 percent.
E)increases the quantity demanded by 0.5 percent.

Question 42

Demand for a good is unit elastic.When price rises by 5 percent,total revenue

A)increases by 5 percent.
B)decreases by 5 percent.
C)does not change.
D)increases by more than 5 percent.
E)decreases by more than 5 percent.

Question 43

Suppose your annual income is $65,000 and you pay $30 a year for your favourite magazine.Your demand for the magazine is likely to be

A)perfectly elastic.
B)inelastic.
C)unit elastic.
D)elastic.
E)elastic - the same as your demand for all other goods.

Question 44

If a rise in price decreases total revenue,then the price elasticity of demand is

A)negative.
B)zero.
C)greater than zero but less than 1.
D)equal to 1.
E)greater than 1.

Question 45

The demand for a good is price elastic if

A)a rise in price increases total revenue.
B)a fall in price decreases total revenue.
C)a rise in price decreases total revenue.
D)the good is a necessity.
E)the demand for the good is very insensitive to changes in price.

Question 46

Business owners are speaking about the price elasticity of demand without using the actual term.Which one of the following statements describes a good with a price elastic demand?

A)"A price cut won't help me.It won't increase sales,and I'll just get less money for each unit."
B)"I don't think a price cut will make any difference to my bottom line.What I may gain from selling more I would lose on the lower price."
C)"My customers are real bargain hunters.Since I set my prices just a few cents below my competitors,customers have flocked to the store,and sales are booming."
D)"With the recent economic recovery,people have more income to spend and sales are booming,even at the previous prices."
E)"A very cold winter has increased my sales of skates and hockey sticks."

Question 47

When the price elasticity of demand is ________,demand for the good is elastic.

A)positive
B)greater than 1
C)equal to 1
D)between 1 and zero
E)equal to zero

Question 48

When the price elasticity of demand is ________,demand for the good is unit elastic.

A)positive
B)greater than 1
C)equal to 1
D)between 1 and zero
E)equal to zero

Question 49

The demand for a good is perfectly elastic when the price elasticity of demand is

A)equal to infinity.
B)between infinity and 1.
C)equal to 1.
D)between 1 and zero.
E)equal to zero.

Question 50

This winter France had unusually cold weather.Next year's grape crop will be substantially reduced.Select the best statement.

A)The French wine supply increases as price rises.
B)If the demand for French wine is elastic,wine producers experience an increase in total revenue.
C)The initial change in the market creates a surplus of French wine.
D)In the final equilibrium,price and quantity are higher.
E)If the demand for French wine is inelastic,wine producers experience an increase in total revenue.

Question 51

A cut in the price increases total revenue.Demand is

A)inelastic.
B)unit elastic.
C)perfectly inelastic.
D)equal to supply.
E)elastic.

Question 52

The demand for a good is price inelastic if

A)a rise in price increases total revenue.
B)a rise in price decreases total revenue.
C)an increase in income decreases total revenue.
D)an increase in income increases total revenue.
E)the good is a luxury.

Question 53

The price elasticity of demand for airplane travel one week in advance of the departure date is most likely to be

A)negative.
B)equal to zero.
C)between zero and 1.
D)equal to 1.
E)greater than 1.

Question 54

When the price elasticity of demand is ________,demand for the good is perfectly inelastic.

A)negative
B)greater than 1
C)equal to 1
D)between 1 and zero
E)equal to zero

Question 55

Which of the following will have the most elastic demand?

A)frozen desserts
B)ice cream
C)strawberry ice cream
D)a banana split made with strawberry and chocolate ice cream
E)a banana split with Nestle strawberry and chocolate ice cream

Question 56

Suppose a university decides to raise tuition fees to increase the total revenue it receives from students.This policy works only if the demand for a university education

A)is unit elastic.
B)is inelastic.
C)is elastic.
D)has a price elasticity greater than 1.
E)is perfectly elastic.

Question 57

Suppose Swiss Chalet in Moncton knows that the demand for their half-chicken meals is elastic.If the manager wants to increase total revenue from half-chicken meal sales,he should

A)lower the price of a half-chicken meal.
B)not change the price of a half-chicken meal.
C)raise the price of a half-chicken meal.
D)decrease the supply of half-chicken meals.
E)hire fewer employees.

Question 58

The price elasticity of demand for airplane travel one year in advance of the departure date is most likely to be

A)negative.
B)equal to zero.
C)between zero and 1.
D)equal to 1.
E)greater than 1.

Question 59

As a result of a poor growing season,the supply of apples decreases and total revenue falls.The demand for apples is

A)perfectly inelastic.
B)elastic.
C)inelastic.
D)unit elastic.
E)either elastic or unit elastic.

Question 60

The price of gasoline rises by 25 percent and remains fixed at the new higher level.Choose the correct statement.

A)The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price.
B)The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price.
C)Initially after the price change,the demand for gasoline will be less elastic than it will be a few years after the price change.
D)The price elasticity of demand for gasoline will decrease in the future.
E)Initially after the price change,the demand for gasoline will be more elastic than it will be a few years after the price change.

Question 61

If the demand for good Z is perfectly inelastic,then the demand curve for good Z is

A)vertical.
B)horizontal.
C)upward sloping.
D)downward sloping.
E)initially upward sloping and then downward sloping.

Question 62

Suppose the demand curve for good X is horizontal.The demand for good X is

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

Question 63

Use the table below to answer the following question.
Table 4.1.4

Refer to Table 4.1.4.The demand for hotel rooms is ________ because ________.

A)inelastic;if the price is set low enough,total revenue will decrease
B)elastic;if the price is set high enough,total revenue will decrease
C)unit elastic;a price cut leaves total revenue unchanged.Total revenue never reaches a maximum
D)decreasing as the price falls;the demand curve for hotel rooms is a straight-line demand curve
E)inelastic;if the price is set low enough,total revenue will increase

Question 64

When the price of peanut butter rises by 4 percent,total revenue decreases by 8 percent.The demand for peanut butter is

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

Question 65

Use the figure below to answer the following question. Figure 4.1.3
Given the relationship shown in Figure 4.1.3 between total revenue from the sale of a good and the quantity of the good sold,then

A)this is an inferior good.
B)this is a normal good.
C)the price elasticity of demand is zero.
D)demand for this good is perfectly elastic.
E)the price elasticity of demand is 1.

Question 66

Suppose there is an increase in the cost of resources used in the production of good A.Then

A)if the price of A rises,the demand for A is elastic.
B)if the total revenue from sales of A increases,the demand for A is elastic.
C)if the total revenue from sales of A decreases,the demand for A is elastic.
D)total revenue increases because the price of A rises.
E)total revenue decreases because the quantity bought and sold of A decreases.

Question 67

A good has a price elasticity of demand equal to zero.As the price of the good falls,the

A)total revenue does not change.
B)quantity demanded does not change.
C)quantity demanded falls to zero.
D)total revenue increases.
E)quantity demanded increases.

Question 68

If Saudi Arabia argues that an increase in the supply of oil will decrease total revenue,then Saudi Arabia believes the demand for oil is

A)income inelastic.
B)income elastic.
C)elastic.
D)inelastic.
E)unit elastic.

Question 69

Use the table below to answer the following question.
Table 4.1.2
Suppose a rise of 8 percent in the price of bison meat in Saskatchewan reduces the consumption of bison meat by 24 percent.Following the price change,consumers spend

A)more of their income on bison.
B)the same amount of their income on bison as before.
C)less of their income on bison.
D)more on products that are complements of bison.
E)zero dollars on bison meat.

Question 70

The demand for orange juice is price elastic.A severe frost,which destroys large quantities of oranges,

A)lowers the equilibrium price but increases total consumer spending on juice.
B)decreases the equilibrium quantity and decreases total consumer spending on juice.
C)decreases both the equilibrium quantity and the price of juice.
D)raises the equilibrium price and increases total consumer spending on juice.
E)raises the equilibrium price but leaves total consumer spending on juice unchanged.

Question 71

A good has a price elasticity of demand equal to 2.If an increase in supply lowers its price from $1.20 to $0.80,the percentage change in quantity demanded is

A)an increase of 80 percent.
B)a decrease of 80 percent.
C)a decrease of 40 percent.
D)an increase of 2 percent.
E)an increase of 40 percent.

Question 72

A technological breakthrough lowers the cost of photocopiers.If the demand for photocopiers is price inelastic,photocopier sales

A)fall and total revenue increases.
B)fall and total revenue decreases.
C)rise and total revenue increases.
D)rise and total revenue decreases.
E)rise,but changes in total revenue will depend on elasticity of supply.

Question 73

Total revenue from the sale of a good decreases if

A)income increases and the good is a normal good.
B)its price rises and demand is elastic.
C)its price rises and demand is inelastic.
D)income falls and the good is an inferior good.
E)its price falls and demand is elastic.

Question 74

Use the table below to answer the following question.
Table 4.1.3

Refer to Table 4.1.3.The table shows the demand schedule for computer chips.As the price rises from $200 a chip to $300 a chip,total revenue ________.So at a price of $250 a chip,demand is ________.

A)falls;inelastic
B)rises;inelastic
C)falls;rises
D)rises;elastic
E)rises;unit elastic

Question 75

A decrease in tuition fees decreases the university's total revenue if the price elasticity of demand for university education is

A)negative.
B)greater than zero but less than 1.
C)equal to 1.
D)greater than 1.
E)less than the elasticity of supply.

Question 76

Use the table below to answer the following question.
Table 4.1.2
Refer to Table 4.1.2.The price elasticity of demand for Jolt

A)equals 1.
B)equals 2.5.
C)equals 3.0.
D)equals 0.33.
E)cannot be calculated because income is not constant.

Question 77

If the Canucks lower ticket prices and total ticket revenue does not change,then the price elasticity of demand for tickets is

A)zero.
B)greater than zero but less than 1.
C)equal to 1.
D)greater than 1.
E)negative.

Question 78

When the price of a good increases by 5 percent,the quantity demanded decreases by 10 percent.The price elasticity of demand is ________.A price rise will ________ total revenue.

A)2.0;decrease
B)0.5;decrease
C)2.0;increase
D)0.5;increase
E)-2.0;decrease

Question 79

Tina and Brian work for the same recording company.Tina claims they would be better off by raising the price of their CDs,while Brian claims they would be better off by lowering the price.Choose the correct statement.

A)Tina thinks the demand for CDs has price elasticity of demand equal to zero,and Brian thinks price elasticity of demand equals 1.
B)Tina thinks the demand for CDs has price elasticity of demand equal to 1,and Brian thinks price elasticity of demand equals zero.
C)Tina thinks the demand for CDs is price elastic,and Brian thinks it is price inelastic.
D)Tina thinks the demand for CDs is price inelastic,and Brian thinks it is price elastic.
E)Tina and Brian both think the demand for CDs is unit elastic.

Question 80

If the price elasticity of demand is zero,then demand is

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