Question 1

Wheat is sold in world markets, usually priced in terms of bushels. In the market for wheat, the price elasticity of demand for wheat would be expressed as

Accepted Answer

A)   the number of bushels of wheat sold.
B)   the number of whatever currency is used in purchasing the wheat.
C)   the number of dollars spent on wheat.
D)   a unitless number.

Question 2

Inelastic demand implies

Accepted Answer

A)   that a one percent increase in price results in a smaller than one percent decrease in quantity demanded.
B)   that a one percent increase in price results in a larger than one percent decrease in quantity demanded.
C)   that a one percent cut in price results in a larger than one percent increase in quantity demanded.
D)   that a one percent decrease or increase in price induces no change in total revenue.

Question 3

Income elasticity of demand reflects

Accepted Answer

A)   the change in total quantity demanded divided by the total change in income.
B)   the responsiveness of the quantity demanded to changes in income, adjusting its relative price so real income does not change.
C)   the responsiveness of income of producers to a change in quantity sold of the good.
D)   the responsiveness of demand to changes in income.

Question 4

Explain the three possible ranges for price elasticity of demand.

Accepted Answer

If the percentage change in quantity dem...

Question 5

We say that a good has elastic demand whenever the absolute value of the price elasticity of demand is greater than 1. A 1 percent change in price therefore causes

Accepted Answer

A)   exactly a 1 percent change in the quantity demanded.
B)   a change of less than 1 percent in the quantity demanded.
C)   a greater than 1 percent change in quantity demanded.
D)   a change that cannot be determined based on 1 percent.

Question 6

When quantity supplied is not very responsive to a change in price, supply is

Accepted Answer

A)   elastic.
B)   unit-elastic.
C)   inelastic.
D)   income sensitive.

Question 7

When demand is elastic,

Accepted Answer

A)   a proportionately small change in price leads to a proportionately large change in quantity supplied.
B)   a proportionately small change in price leads to a proportionately small change in quantity supplied.
C)   a proportionately small change in price leads to a proportionately large change in quantity demanded.
D)   a proportionately small change in price leads to a proportionately small change in quantity demanded.

Question 8

If the demand curve for a product is horizontal, then

Accepted Answer

A)   the demand for the product is perfectly inelastic.
B)   the demand for the product is perfectly elastic.
C)   only a certain amount of the product will be consumed regardless of price.
D)   the price elasticity of the product approaches zero.

Question 9

Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

Accepted Answer

Time is an important determinant in the ...

Question 10

The cross price elasticity of demand is defined as

Accepted Answer

A)   the percentage change in the supply for one good (a shift in the supply curve)  divided by the percentage change in price of a related good.
B)   the percentage change in demand for two different commodities.
C)   the percentage change in the demand for one good (a shift in the demand curve)  divided by the percentage change in price of a related good.
D)   the percentage change in price for two different commodities.

Question 11

A vertical supply curve may be described as being

Accepted Answer

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

Question 12

If your income rises by 25 percent and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)

Accepted Answer

A)   substitute.
B)   normal good.
C)   complement.
D)   inferior good.

Question 13

X increases from $12 to $15, is approximately equal to A)  +1.03 B)  +2.26. C)  +0.44. D)  -0.44." class="answers-bank-image d-inline" rel="preload" >
-In the above table, the cross price elasticity of demand (using averages)  for Z with good X, when PX increases from $12 to $15, is approximately equal to

Accepted Answer

A)   +1.03
B)   +2.26.
C)   +0.44.
D)   -0.44.

Question 14

-In the above figure, along which range would total revenue rise by lowering prices?

Accepted Answer

A)   Between point a and point b
B)   Between point c and point d
C)   Between point d and point e
D)   Below point e

Question 15

A measure of the responsiveness of the demand for one good to the percentage change in the price of another good is

Accepted Answer

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

Question 16

-Use the above table. Based on the information in the table, artisan bread is a(n)

Accepted Answer

A)   normal good.
B)   necessary good.
C)   inferior good.
D)   negative good.

Question 17

1P2, demand is A)  unit elastic. B)  elastic. C)  inelastic. D)  perfectly elastic." class="answers-bank-image d-inline" rel="preload" >
-In the above figure, over the price range P1P2, demand is

Accepted Answer

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

Question 18

-In the above figure, along which range would total revenue rise by raising prices?

Accepted Answer

A)   Between point a and point b
B)   Between point c and point d
C)   Between point d and point e
D)   Above point a

Question 19

Suppose the quantity demanded of ice cream cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25. In this situation, the elasticity of demand, calculated using the average method, is

Accepted Answer

A)   3.
B)   1.
C)   0.33.
D)   1.33.

Question 20

For which of the following would the absolute price elasticity of demand be greatest?

Accepted Answer

A)   Salt
B)   Tickets to the Super Bowl
C)   Pepsi Cola
D)   Gasoline

Exam 19: Demand and Supply Elasticity

Suppose the quantity demanded of ice cream cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25. In this situation, the elasticity of demand, calculated using the average method, is

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-In the above figure, along which range would total revenue rise by raising prices?

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Inelastic demand implies

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Income elasticity of demand reflects

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We say that a good has elastic demand whenever the absolute value of the price elasticity of demand is greater than 1. A 1 percent change in price therefore causes

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-In the above figure, over the price range P1P2, demand is

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When demand is elastic,

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A measure of the responsiveness of the demand for one good to the percentage change in the price of another good is

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The cross price elasticity of demand is defined as

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A vertical supply curve may be described as being

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-Use the above table. Based on the information in the table, artisan bread is a(n)

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If your income rises by 25 percent and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)

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When quantity supplied is not very responsive to a change in price, supply is

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-In the above table, the cross price elasticity of demand (using averages) for Z with good X, when PX increases from $12 to $15, is approximately equal to

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If the demand curve for a product is horizontal, then

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Explain the three possible ranges for price elasticity of demand.

Correct AnswerverifiedIf the percentage change in quantity dem...View AnswerShow Answer

Wheat is sold in world markets, usually priced in terms of bushels. In the market for wheat, the price elasticity of demand for wheat would be expressed as

Correct AnswerverifiedShow Answer

For which of the following would the absolute price elasticity of demand be greatest?

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Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

Correct AnswerverifiedTime is an important determinant in the ...View AnswerShow Answer

-In the above figure, along which range would total revenue rise by lowering prices?

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-In the above figure, over the price range P₁P₂, demand is

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-In the above table, the cross price elasticity of demand (using averages) for Z with good X, when P_X increases from $12 to $15, is approximately equal to

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If the percentage change in quantity dem...
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Time is an important determinant in the ...
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