Question 1

The price elasticity of demand is a measure of

Accepted Answer

A)   the equilibrium price of a product.
B)   buyers' responsiveness to changes in the price of a product.
C)   the amount of a product purchased when income increases.
D)   whether a product is a substitute or a complement.
E)   how much a change in demand affects the equilibrium price.

Question 2

Anna owns the Sweet Alps Chocolate store.She charges $10 per pound for her hand made chocolate.You,the economist,have calculated the elasticity of demand for chocolate in her town to be 2.5.If she wants to increase her total revenue,what advice will you give her?

Accepted Answer

You should tell her to lower h...

Question 3

If the demand for insulin is inelastic,an increase in insulin prices leads to

Accepted Answer

A)   less total revenue for insulin makers.
B)   more total revenue for insulin makers.
C)   no change in total revenue for insulin makers.
D)   first a decrease, then an increase in total revenue for insulin makers.
E)   Total revenue probably changes, but we need more information about the change in total expenditures on insulin to determine if the total revenue rises, falls, or stays the same.

Question 4

The income elasticity of demand is

Accepted Answer

A)   positive for a normal good.
B)   zero for an inferior good.
C)   less than one for an income elastic normal good.
D)   Only answers A and B are correct.
E)   Answers A, B, and C are correct.

Question 5

When hamburger is $3 per pound,Ms.Rush buys 6 pounds.When hamburger is $2 per pound,Ms.Rush buys 10 pounds.Describe Ms.Rush's demand between these two prices.

Accepted Answer

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

Question 6

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

Accepted Answer

The formula for the cross elasticity of ...

Question 7

Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month.Using the midpoint formula,the ________ percent change in price lead to a ________ percent change in the quantity demanded.

Accepted Answer

A)   12.5; 10.5
B)   13.3; 10.0
C)   11.8; 11.1
D)   8.0; 9.5
E)   None of the above answers is correct.

Question 8

Using the midpoint method,if the price of an airline ticket from Orlando to Pittsburgh falls from $275 to $238,the percentage change in price is

Accepted Answer

A)   1442 percent.
B)   14.42 percent.
C)   15.54 percent.
D)   13.45 percent.
E)   68.00 percent.

Question 9

Of the following,which good has the most elastic demand?

Accepted Answer

A)   food
B)   breakfast food
C)   cereal
D)   Post Raisin Bran
E)   Post Raisin Brand purchased at a Safeway grocery store

Question 10

Patrick lives near two gas stations,Exxon and Shell.If Exxon decreases the price of gas,we predict that the quantity of gasoline demanded at Shell will

Accepted Answer

A)   decrease because Exxon and Shell gas are complements.
B)   decrease because Exxon and Shell gas are substitutes.
C)   increase because Exxon and Shell gas are substitutes.
D)   increase because Exxon and Shell gas are complements.
E)   not change Exxon and Shell are different brands of gasoline.

Question 11

Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic.As a result,a 7 percent increase in the price charged by the owner of this stand leads to

Accepted Answer

A)   zero peaches sold by this stand.
B)   no change in the quantity demanded at this stand.
C)   a 7 percent decrease in the quantity demanded at this stand.
D)   a 7 percent decrease in demand at this stand.
E)   a virtually infinite increase in the quantity demanded at this stand.

Question 12

If a 20 percent increase in the price of a good does not change the quantity supplied,the

Accepted Answer

A)   supply is perfectly inelastic.
B)   supply is unit elastic.
C)   supply is perfectly elastic.
D)   supply is elastic.
E)   None of the above answers is correct.

Question 13

All of the following statements are true EXCEPT

Accepted Answer

A)   the demand for food is less elastic than the demand for a Hawaiian vacation.
B)   the demand for clothing is less elastic than the demand for blue jeans.
C)   the demand for gasoline is more elastic the longer the time elapsed.
D)   the smaller the proportion of income spent on a good, the more inelastic demand will be.
E)   the demand for Nike running shoes is less elastic than the demand for shoes.

Question 14

If the cross elasticity of demand between Coke and Pepsi is 2.02,then Coke and Pepsi are

Accepted Answer

A)   complements.
B)   substitutes.
C)   normal goods.
D)   inferior goods.
E)   Both answers B and C are correct.

Question 15

If the cross elasticity of demand between two goods is negative,are the goods substitutes or complements?

Accepted Answer

If the cross elastic...

Question 16

The price of beef increased by 20 percent and the quantity supplied increased by 10 percent.The supply of beef is

Accepted Answer

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

Question 17

Suppose the price of a tie rises from $45 to $55.Using the midpoint method,what is the percentage change in price?

Accepted Answer

A)   10 percent
B)   -10 percent
C)   20 percent
D)   -20 percent
E)   100 percent

Question 18

Moving downward along a linear (straight-line) downward-sloping demand curve,the

Accepted Answer

A)   price elasticity of demand does not change.
B)   quantity demanded decreases.
C)   demand becomes more elastic.
D)   demand becomes less elastic.
E)   total revenue never changes.

Question 19

If the price of a DVD falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 per hour to 100,000 per hour,using the midpoint formula the elasticity of supply equals

Accepted Answer

A)   0.33.
B)   2.94.
C)   3.08.
D)   0.23.
E)   -3.08.

Question 20

If a 10 percent price increase generates a 10 percent decrease in quantity demanded,then demand is

Accepted Answer

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

Exam 5: Elasticities of Demand and Supply

Moving downward along a linear (straight-line) downward-sloping demand curve,the

Correct AnswerverifiedShow Answer

Patrick lives near two gas stations,Exxon and Shell.If Exxon decreases the price of gas,we predict that the quantity of gasoline demanded at Shell will

Correct AnswerverifiedShow Answer

Suppose the price of a tie rises from $45 to $55.Using the midpoint method,what is the percentage change in price?

Correct AnswerverifiedShow Answer

If a 10 percent price increase generates a 10 percent decrease in quantity demanded,then demand is

Correct AnswerverifiedShow Answer

The price elasticity of demand is a measure of

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Of the following,which good has the most elastic demand?

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If the demand for insulin is inelastic,an increase in insulin prices leads to

Correct AnswerverifiedShow Answer

Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month.Using the midpoint formula,the ________ percent change in price lead to a ________ percent change in the quantity demanded.

Correct AnswerverifiedShow Answer

Using the midpoint method,if the price of an airline ticket from Orlando to Pittsburgh falls from $275 to $238,the percentage change in price is

Correct AnswerverifiedShow Answer

All of the following statements are true EXCEPT

Correct AnswerverifiedShow Answer

If the cross elasticity of demand between Coke and Pepsi is 2.02,then Coke and Pepsi are

Correct AnswerverifiedShow Answer

The price of beef increased by 20 percent and the quantity supplied increased by 10 percent.The supply of beef is

Correct AnswerverifiedShow Answer

Anna owns the Sweet Alps Chocolate store.She charges $10 per pound for her hand made chocolate.You,the economist,have calculated the elasticity of demand for chocolate in her town to be 2.5.If she wants to increase her total revenue,what advice will you give her?

Correct AnswerverifiedYou should tell her to lower h...View AnswerShow Answer

Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic.As a result,a 7 percent increase in the price charged by the owner of this stand leads to

Correct AnswerverifiedShow Answer

If the price of a DVD falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 per hour to 100,000 per hour,using the midpoint formula the elasticity of supply equals

Correct AnswerverifiedShow Answer

When hamburger is $3 per pound,Ms.Rush buys 6 pounds.When hamburger is $2 per pound,Ms.Rush buys 10 pounds.Describe Ms.Rush's demand between these two prices.

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If the cross elasticity of demand between two goods is negative,are the goods substitutes or complements?

Correct AnswerverifiedIf the cross elastic...View AnswerShow Answer

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

Correct AnswerverifiedThe formula for the cross elasticity of ...View AnswerShow Answer

The income elasticity of demand is

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If a 20 percent increase in the price of a good does not change the quantity supplied,the

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Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month.Using the midpoint formula,the percent change in price lead to a percent change in the quantity demanded.

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You should tell her to lower h...
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If the cross elastic...
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The formula for the cross elasticity of ...
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