Question 1

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 2

Demand is said to be price elastic if

Accepted Answer

A)   the price of the good responds substantially to changes in demand.
B)   demand shifts substantially when income or the expected future price of the good changes.
C)   buyers do not respond much to changes in the price of the good.
D)   buyers respond substantially to changes in the price of the good.E) C) and D)
F) B) and C)

Question 3

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. Total consumer spending on aged cheddar cheese will

Accepted Answer

A)   increase, and total consumer spending on bread will increase.
B)   increase, and total consumer spending on bread will decrease.
C)   decrease, and total consumer spending on bread will increase.
D)   decrease, and total consumer spending on bread will decrease.E) A) and B)
F) C) and D)

Question 4

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)   tablet computers
B)   leather boots
C)   lightbulbs
D)   optional textbooksE) C) and D)
F) B) and D)

Question 5

Demand is elastic if the price elasticity of demand is

Accepted Answer

A)   less than 1.
B)   equal to 1.
C)   equal to 0.
D)   greater than 1.E) All of the above
F) C) and D)

Question 6

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 7

If the cross-price elasticity of demand for two goods is 1.25, then

Accepted Answer

A)   the two goods are luxuries.
B)   the two goods are substitutes.
C)   one of the goods is normal and the other good is inferior.
D)   the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand.E) A) and B)
F) C) and D)

Question 8

Figure 5-7 
-Refer to Figure 5-7. For prices below $5, demand is price

Accepted Answer

A)   elastic, and raising price will increase total revenue.
B)   inelastic, and raising price will increase total revenue.
C)   elastic, and lowering price will increase total revenue.
D)   inelastic, and lowering price will increase total revenue.E) B) and D)
F) C) and D)

Question 9

When supply is perfectly elastic, the value of the price elasticity of supply is

Accepted Answer

A)   0.
B)   1.
C)   greater than 0 and less than 1.
D)   infinity.E) B) and C)
F) None of the above

Question 10

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 11

The price elasticity of demand changes as we move along a

Accepted Answer

A)   horizontal demand curve.
B)   vertical demand curve.
C)   linear, downward-sloping demand curve.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 12

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)   An increase in price of 2% causes a decrease in quantity demanded of 2%.
B)   A decrease in price of 2% causes an increase in quantity demanded of 0%.
C)   A decrease in price of 2% causes a decrease in total revenue of 0%.
D)   An increase in price of 2% causes a decrease in quantity demanded of 1/2%.E) All of the above
F) C) and D)

Question 13

Figure 5-12 
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)   increased from $12 to $15.
B)   decreased from $39 to $36.
C)   decreased from $27 to $24.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%.
The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 15

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Accepted Answer

A) True 
 B)False

Question 16

Suppose demand is given by the equation:  Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Accepted Answer

The price ...

Question 17

Table 5-2
 
-Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Accepted Answer

A)   0.31.
B)   0.46.
C)   1.25.
D)   2.17E) B) and C)
F) A) and C)

Question 18

Table 5-1
 
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)   A is pens and B is pencils.
B)   A is a Snickers bar and B is a Milky Way bar.
C)   A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler.
D)   A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by a tourist in a rain forest.E) A) and B)
F) A) and D)

Question 19

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)   consumers to buy less of the good as price rises.
B)   consumers to avoid monopolistic markets in favor of competitive markets.
C)   firms to produce more of a good as price rises.
D)   firms to respond to the tastes of consumers.E) A) and B)
F) A) and C)

Question 20

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Demand is elastic if the price elasticity of demand is

Correct Answer
verified

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct Answer
verified

A government program that reduces land under cultivation hurts farmers but helps consumers.

Correct Answer
verified

If the cross-price elasticity of demand for two goods is 1.25, then

Correct Answer
verified

Which of the following is likely to have the most price inelastic demand?

Correct Answer
verified

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Correct Answer
verified
The price ...
View Answer

The price elasticity of demand for a good measures the willingness of

Correct Answer
verified

When supply is perfectly elastic, the value of the price elasticity of supply is

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct Answer
verified

In which of these instances is demand said to be perfectly inelastic?

Correct Answer
verified

Demand is said to be price elastic if

Correct Answer
verified

Correct Answer
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If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Correct Answer
verified

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Correct Answer
verified

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct Answer
verified

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Correct Answer
verified

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Correct Answer
verified

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct Answer
verified

The price elasticity of demand changes as we move along a

Correct Answer
verified

Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price

Correct Answer
verified

Exam 5: Elasticity and Its Application

Demand is elastic if the price elasticity of demand is

Correct AnswerverifiedShow Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct AnswerverifiedShow Answer

A government program that reduces land under cultivation hurts farmers but helps consumers.

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand for two goods is 1.25, then

Correct AnswerverifiedShow Answer

Which of the following is likely to have the most price inelastic demand?

Correct AnswerverifiedShow Answer

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Correct AnswerverifiedThe price ...View AnswerShow Answer

The price elasticity of demand for a good measures the willingness of

Correct AnswerverifiedShow Answer

When supply is perfectly elastic, the value of the price elasticity of supply is

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct AnswerverifiedShow Answer

In which of these instances is demand said to be perfectly inelastic?

Correct AnswerverifiedShow Answer

Demand is said to be price elastic if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Correct AnswerverifiedShow Answer

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Correct AnswerverifiedShow Answer

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct AnswerverifiedShow Answer

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Correct AnswerverifiedShow Answer

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Correct AnswerverifiedShow Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct AnswerverifiedShow Answer

The price elasticity of demand changes as we move along a

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price

Correct AnswerverifiedShow Answer

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The price ...
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