Question 1

The demand for shoes is _____ price elastic than the demand for sneakers because the scope of the market for shoes is _____ broadly defined.

Accepted Answer

A)   less; less
B)   more; less
C)   less; more
D)   more; moreE) A) and D)
F) B) and C)

Question 2

The demand for Ben & Jerry's ice cream is _____ price elastic than the demand for all ice cream because _____.

Accepted Answer

A)   less; the scope of the market for Ben & Jerry's is less broadly defined
B)   more; the scope of the market for Ben & Jerry's is less broadly defined
C)   less; Ben & Jerry's has fewer available substitutes
D)   more; Ben & Jerry's has fewer available substitutesE) All of the above
F) C) and D)

Question 3

Income elasticity of demand describes:

Accepted Answer

A)   how much the quantity demanded changes in response to a change in consumers' incomes.
B)   which way the demand curve shifts in response to a change in price.
C)   how much the quantity demanded changes in response to a change in price.
D)   how quickly the market will change in response to a change in consumers' incomes.E) B) and C)
F) B) and D)

Question 4

The cross-price elasticity of demand between peanut butter and jelly is likely:

Accepted Answer

A)   a positive number.
B)   a very high positive number.
C)   a negative number.
D)   less than one.E) B) and C)
F) A) and B)

Question 5

If the price of a good increases by 10 percent and its quantity demanded drops by 50 percent, the price elasticity of demand is:

Accepted Answer

A)   1.0.
B)   0.2.
C)   −5.0.
D)   2.0.E) None of the above
F) B) and C)

Question 6

The price elasticity of demand for eggs is −0.27 and the price elasticity of demand for soft drinks is −0.70. Therefore, the demand for eggs:

Accepted Answer

A)   is more elastic than the demand for soft drinks.
B)   is less elastic than the demand for soft drinks.
C)   cannot be compared to the demand for soft drinks because both have negative price elasticities.
D)   cannot be compared to the demand for soft drinks because eggs cannot be substituted for soft drinks.E) All of the above
F) None of the above

Question 7

If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _____ and is _____.

Accepted Answer

A)   −1.5; inelastic
B)   −1.5; elastic
C)   −0.67; elastic
D)   −0.67; inelasticE) A) and B)
F) B) and C)

Question 8

Consider the demand curve in the graph shown. What is the price elasticity of demand between a price of $4 and $6?

Accepted Answer

A)   −0.45
B)   −2.20
C)   −0.18
D)   −0.40E) None of the above
F) B) and C)

Question 9

Suppose when the price of cupcakes goes from $2 to $3 per cupcake, production increases from 350,000 cupcakes to 450,000 cupcakes per year. Using the mid-point method, what is the price elasticity of supply?

Accepted Answer

A)   1.6
B)   0.4
C)   0.25
D)   0.63E) B) and C)
F) B) and D)

Question 10

Suppose the price elasticity of demand for eggs is −0.27. Thus, −0.27 is:

Accepted Answer

A)   the percentage change in the quantity demanded of eggs when the price of eggs increases by one percent.
B)   the size of the shift in the demand for eggs when the price of eggs changes by one percent.
C)   the size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price fluctuation.
D)   the percentage change in the price of eggs when the quantity demanded of eggs increases by one percent.E) A) and B)
F) B) and C)

Question 11

A good with a unit elastic demand has a:

Accepted Answer

A)   perfectly horizontal demand curve.
B)   perfectly vertical demand curve.
C)   price elasticity greater than 1.
D)   price elasticity equal to −1.E) A) and D)
F) A) and C)

Question 12

Economists use the percentage change in quantity rather than the absolute change in quantity for elasticity calculations because:

Accepted Answer

A)   percentage changes are easier to calculate than absolute changes.
B)   elasticity measurements come out the same when using percentage changes regardless of the unit of measurement used for quantity.
C)   absolute changes in quantity are difficult to convert to changes in price.
D)   absolute changes often result in negative numbers.E) A) and B)
F) A) and C)

Question 13

A horizontal demand curve indicates that:

Accepted Answer

A)   quantity demanded will rise if the price increases by any amount.
B)   quantity demanded will drop to zero if the price increases by any amount.
C)   quantity demanded will remain unchanged no matter what happens to the price.
D)   price is not important in this market.E) A) and B)
F) A) and C)

Question 14

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $40 to $60?

Accepted Answer

A)   1.67
B)   0.4
C)   0.67
D)   0.60E) B) and C)
F) B) and D)

Question 15

Income elasticity will be positive for:

Accepted Answer

A)   all normal goods.
B)   all inferior goods.
C)   only necessities.
D)   only luxury goods with substitutes.E) B) and C)
F) All of the above

Question 16

Demand for a good is inelastic if:

Accepted Answer

A)   total revenue decreases when price increases.
B)   the quantity effect outweighs the price effect of a price increase.
C)   the absolute value of price elasticity is greater than 1.
D)   total revenue increases when price increases.E) A) and D)
F) C) and D)

Question 17

Suppose the price of cereal increases by 10 percent and the amount of milk demanded decreases by 2 percent. What is the cross-price elasticity of demand between these two goods?

Accepted Answer

A)   5
B)   −5
C)   0.2
D)   −0.2E) A) and D)
F) All of the above

Question 18

A decrease in price:

Accepted Answer

A)   causes a decrease in total revenue due to the quantity effect.
B)   causes an increase in total revenue due to the price effect.
C)   does not cause a quantity effect when demand is perfectly inelastic.
D)   does not change quantity demanded if demand is elastic.E) B) and D)
F) B) and C)

Question 19

Suppose an increase in price decreases quantity demanded from 210 to 190 units. Using the mid-point formula, what is the percentage change in quantity demanded?

Accepted Answer

A)   2 = 200 percent
B)   −0.2 = −20 percent
C)   0.2 = 20 percent
D)   −0.1 = −10 percentE) All of the above
F) B) and D)

Question 20

The demand for a specific brand of corn flakes cereal is likely to be:

Accepted Answer

A)   very price elastic, because there are many close substitutes available.
B)   less price elastic, because there are many close substitutes available.
C)   very price elastic, because the cost of cornflakes relative to income is low.
D)   less price elastic, because cornflakes are an inferior good for many consumers.E) All of the above
F) A) and B)

Exam 4: Elasticity

A good with a unit elastic demand has a:

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Suppose the price of cereal increases by 10 percent and the amount of milk demanded decreases by 2 percent. What is the cross-price elasticity of demand between these two goods?

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The demand for Ben & Jerry's ice cream is _____ price elastic than the demand for all ice cream because _____.

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Suppose an increase in price decreases quantity demanded from 210 to 190 units. Using the mid-point formula, what is the percentage change in quantity demanded?

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If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _____ and is _____.

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The price elasticity of demand for eggs is −0.27 and the price elasticity of demand for soft drinks is −0.70. Therefore, the demand for eggs:

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A horizontal demand curve indicates that:

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Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $40 to $60?

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Income elasticity will be positive for:

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The demand for a specific brand of corn flakes cereal is likely to be:

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The demand for shoes is _____ price elastic than the demand for sneakers because the scope of the market for shoes is _____ broadly defined.

Correct AnswerverifiedShow Answer

Consider the demand curve in the graph shown. What is the price elasticity of demand between a price of $4 and $6?

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If the price of a good increases by 10 percent and its quantity demanded drops by 50 percent, the price elasticity of demand is:

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Income elasticity of demand describes:

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Suppose when the price of cupcakes goes from $2 to $3 per cupcake, production increases from 350,000 cupcakes to 450,000 cupcakes per year. Using the mid-point method, what is the price elasticity of supply?

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for eggs is −0.27. Thus, −0.27 is:

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Demand for a good is inelastic if:

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The cross-price elasticity of demand between peanut butter and jelly is likely:

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A decrease in price:

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Economists use the percentage change in quantity rather than the absolute change in quantity for elasticity calculations because:

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The demand for Ben & Jerry's ice cream is _ price elastic than the demand for all ice cream because _.

Correct Answer
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If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _ and is _.

Correct Answer
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The demand for shoes is _ price elastic than the demand for sneakers because the scope of the market for shoes is _ broadly defined.

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