Question 1

(Consider This) Elastic demand is analogous to a __________ and inelastic demand to a _________.

Accepted Answer

A)   normal wrench;socket wrench
B)   tight rubber band;loose rubber band
C)   Ace bandage;firm rubber tie-down
D)   one-foot ruler;tape measureE) All of the above
F) B) and C)

Question 2

A firm can sell as much as it wants at a constant price.Demand is thus:

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   relatively elastic.E) All of the above
F) A) and D)

Question 3

If price and total revenue vary in opposite directions,demand is:

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   relatively elastic.E) A) and D)
F) A) and B)

Question 4

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent.We can conclude that quantity demanded:

Accepted Answer

A)   increased by 7 percent.
B)   decreased by 7 percent.
C)   decreased by 9 percent.
D)   decreased by 1.75 percent.E) None of the above
F) A) and B)

Question 5

The formula for cross elasticity of demand is percentage change in:

Accepted Answer

A)   quantity demanded of X/percentage change in price of X.
B)   quantity demanded of X/percentage change in income.
C)   quantity demanded of X/percentage change in price of Y.
D)   price of X/percentage change in quantity demanded of Y.E) A) and B)
F) B) and C)

Question 6

If price and total revenue are directly related,demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 7

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is:

Accepted Answer

A)   negative and therefore X is an inferior good.
B)   positive but less than one;therefore X is an inferior good.
C)   positive and therefore X is an inferior good.
D)   positive and therefore X is a normal good.E) A) and D)
F) C) and D)

Question 8

The demand schedules for such products as eggs,bread,and electricity tend to be:

Accepted Answer

A)   perfectly price elastic.
B)   of unit price elasticity.
C)   relatively price inelastic.
D)   relatively price elastic.E) B) and D)
F) C) and D)

Question 9

Most demand curves are relatively elastic in the upper-left portion because the original price:

Accepted Answer

A)   and quantity from which the percentage changes in price and quantity are calculated are both large.
B)   and quantity from which the percentage changes in price and quantity are calculated are both small.
C)   from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large.
D)   from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.E) A) and C)
F) B) and C)

Question 10

Which of the following goods will least likely suffer a decline in demand during a recession?

Accepted Answer

A)   Dinner at a nice restaurant
B)   iPods
C)   Toothpaste
D)   Plasma screen and LCD TVsE) B) and C)
F) None of the above

Question 11

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:

Accepted Answer

A)   more elastic the supply curve.
B)   larger the elasticity of demand coefficient.
C)   more elastic the demand for the product.
D)   more inelastic the demand for the product.E) A) and C)
F) B) and C)

Question 12

Income elasticity measures the effect of a change in income on the purchases of some good or service.

Accepted Answer

A) True 
 B)False

Question 13

If demand for a product is elastic,the value of the price elasticity coefficient is:

Accepted Answer

A)   zero.
B)   greater than one.
C)   equal to one.
D)   less than one.E) A) and C)
F) C) and D)

Question 14

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because:

Accepted Answer

A)   soft drinks are normal goods.
B)   the income effect always exceeds the substitution effect.
C)   there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.
D)   there are more good substitutes for soft drinks as a whole than for Pepsi specifically.E) None of the above
F) C) and D)

Question 15

Which of the following generalizations is not correct?

Accepted Answer

A)   The larger an item is in one's budget,the greater the price elasticity of demand.
B)   The price elasticity of demand is greater for necessities than it is for luxuries.
C)   The larger the number of close substitutes available,the greater will be the price elasticity of demand for a particular product.
D)   The price elasticity of demand is greater the longer the time period under consideration.E) B) and D)
F) B) and C)

Question 16

Supply curves tend to be:

Accepted Answer

A)   perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply.
B)   more elastic in the long run because there is time for firms to enter or leave the industry.
C)   perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production.
D)   less elastic in the long run because there is time for firms to enter or leave an industry.E) None of the above
F) B) and D)

Question 17

If price changes and total revenue changes in the opposite direction,demand is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is correct?

Accepted Answer

A)   If demand is elastic,an increase in price will increase total revenue.
B)   If demand is elastic,a decrease in price will decrease total revenue.
C)   If demand is elastic,a decrease in price will increase total revenue.
D)   If demand is inelastic,an increase in price will decrease total revenue.E) B) and C)
F) A) and B)

Question 19

(Last Word) Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software.This implies that Microsoft views the demand curve for the software upgrade to be:

Accepted Answer

A)   more elastic than the demand for the original software.
B)   upsloping rather than downsloping.
C)   less elastic than the demand for the original software.
D)   of less value than the original software.E) B) and C)
F) A) and C)

Question 20

Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is:

Accepted Answer

A)   negative and therefore X is an inferior good.
B)   negative and therefore X is a normal good.
C)   positive and therefore X is an inferior good.
D)   positive and therefore X is a normal good.E) None of the above
F) A) and B)

Exam 6: Elasticity

The formula for cross elasticity of demand is percentage change in:

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The demand schedules for such products as eggs,bread,and electricity tend to be:

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A firm can sell as much as it wants at a constant price.Demand is thus:

Correct AnswerverifiedShow Answer

If price changes and total revenue changes in the opposite direction,demand is relatively elastic.

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(Consider This) Elastic demand is analogous to a __________ and inelastic demand to a _________.

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If demand for a product is elastic,the value of the price elasticity coefficient is:

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A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:

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Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is:

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Which of the following generalizations is not correct?

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Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent.We can conclude that quantity demanded:

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If price and total revenue vary in opposite directions,demand is:

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Income elasticity measures the effect of a change in income on the purchases of some good or service.

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Which of the following is correct?

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Most demand curves are relatively elastic in the upper-left portion because the original price:

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If price and total revenue are directly related,demand is inelastic.

Correct AnswerverifiedShow Answer

Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is:

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Supply curves tend to be:

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Which of the following goods will least likely suffer a decline in demand during a recession?

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(Last Word) Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software.This implies that Microsoft views the demand curve for the software upgrade to be:

Correct AnswerverifiedShow Answer

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because:

Correct AnswerverifiedShow Answer

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(Consider This) Elastic demand is analogous to a __ and inelastic demand to a _.

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