Question 1

If one's demand for peanut butter decreases as income rises, the income elasticity of demand for the product is

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   negative.E) All of the above
F) A) and D)

Question 2

Given a price elasticity of demand of -0.33, a decrease in price will

Accepted Answer

A)   reduce total revenue.
B)   increase total revenue.
C)   leave total revenue unchanged.
D)   decrease quantity.E) A) and B)
F) All of the above

Question 3

If the absolute price elasticity of demand is 0.2, a 10 percent increase in the price will cause

Accepted Answer

A)   the quantity demanded to decrease by 2 percent.
B)   the quantity demanded to decrease by 20 percent.
C)   the quantity demanded to decrease by 5 percent.
D)   the quantity demanded to decrease by 0.2 percent.E) A) and B)
F) All of the above

Question 4

The formal definition of price elasticity of demand is

Accepted Answer

A)   change in quantity demanded divided by change in price.
B)   quantity demanded divided by price.
C)   percentage change in quantity demanded divided by percentage change in price.
D)   quantity demanded multiplied by price and divided by 100.E) A) and B)
F) A) and C)

Question 5

The absolute price elasticity of demand would be the lowest for

Accepted Answer

A)   automobiles.
B)   Pizza Hut pizza.
C)   salt.
D)   movie tickets.E) B) and C)
F) None of the above

Question 6

Which of the following is NOT a factor that determines the price elasticity of demand?

Accepted Answer

A)   The amount that suppliers have made available
B)   The percentage of a consumer's total budget spent on the good
C)   The existence of substitutes
D)   The length of time allowed for adjustments to change in the price of the commoditiesE) A) and D)
F) All of the above

Question 7

-In the above figure, along the section of the demand curve between point a and point b, demand is

Accepted Answer

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

Question 8

Price elasticities are calculated for four goods, and the values are: 4.1; 3.7; 1.0; 0.002. Which price elasticity is most elastic?

Accepted Answer

A)   4.1
B)   3.7
C)   1.0
D)   0.002E) A) and B)
F) None of the above

Question 9

When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is

Accepted Answer

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

Question 10

Suppose that when the price of root beer rises 10%, the quantity of pizza demanded falls 20%. This would mean that pizza and root beer are

Accepted Answer

A)   substitutes, with a cross price elasticity of 0.5.
B)   complements, with a cross price elasticity of -0.5.
C)   substitutes, with a cross price elasticity of -2.0.
D)   complements, with a cross price elasticity of -2.0.E) A) and C)
F) A) and B)

Question 11

The price elasticity of demand is a measure of

Accepted Answer

A)   the responsiveness of the quantity demanded of a good to a changes in the price of the good.
B)   the quantity demanded of a good at a given price.
C)   the demand for a product holding prices constant.
D)   the horizontal shift in the demand curve when the price of a good changes.E) All of the above
F) A) and C)

Question 12

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent. The cross price elasticity of demand between goods X and Y is

Accepted Answer

A)   0.66.
B)   1.75.
C)   2.0.
D)   1.5.E) B) and D)
F) B) and C)

Question 13

If the price of one good increases, and as a result the demand for another related good falls, the goods are

Accepted Answer

A)   substitutes.
B)   normal goods.
C)   complements.
D)   inferior goods.E) B) and D)
F) None of the above

Question 14

When two goods are substitutes for each other, the cross price elasticity of demand

Accepted Answer

A)   will be negative.
B)   will be zero.
C)   may be either positive or negative.
D)   will be positive.E) None of the above
F) B) and C)

Question 15

A perfectly inelastic supply curve is

Accepted Answer

A)   an upward sloping straight line that intersects the origin.
B)   horizontal.
C)   vertical.
D)   downward sloping.E) C) and D)
F) B) and D)

Question 16

The responsiveness of demand to changes in income holding the good's relative price constant is

Accepted Answer

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

Question 17

-Use the above figure. Which graph depicts an inferior good?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) B) and D)
F) B) and C)

Question 18

Generally, expenses on a sport utility vehicle are a large part of a consumer's budget, so the demand for sport utility vehicles is more likely to be

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   perfectly elastic.E) None of the above
F) C) and D)

Question 19

Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is

Accepted Answer

A)   0.69.
B)   1.45.
C)   1.00.
D)   infinity.E) A) and D)
F) All of the above

Question 20

A situation in which there is a reduction in quantity supplied to zero when there is the slightest decrease in price is

Accepted Answer

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

Exam 19: Demand and Supply Elasticity

When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is

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The absolute price elasticity of demand would be the lowest for

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A perfectly inelastic supply curve is

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When two goods are substitutes for each other, the cross price elasticity of demand

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If the price of one good increases, and as a result the demand for another related good falls, the goods are

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If the absolute price elasticity of demand is 0.2, a 10 percent increase in the price will cause

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The formal definition of price elasticity of demand is

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The price elasticity of demand is a measure of

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-Use the above figure. Which graph depicts an inferior good?

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A situation in which there is a reduction in quantity supplied to zero when there is the slightest decrease in price is

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Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is

Correct AnswerverifiedShow Answer

Suppose that when the price of root beer rises 10%, the quantity of pizza demanded falls 20%. This would mean that pizza and root beer are

Correct AnswerverifiedShow Answer

Which of the following is NOT a factor that determines the price elasticity of demand?

Correct AnswerverifiedShow Answer

Generally, expenses on a sport utility vehicle are a large part of a consumer's budget, so the demand for sport utility vehicles is more likely to be

Correct AnswerverifiedShow Answer

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent. The cross price elasticity of demand between goods X and Y is

Correct AnswerverifiedShow Answer

If one's demand for peanut butter decreases as income rises, the income elasticity of demand for the product is

Correct AnswerverifiedShow Answer

The responsiveness of demand to changes in income holding the good's relative price constant is

Correct AnswerverifiedShow Answer

Given a price elasticity of demand of -0.33, a decrease in price will

Correct AnswerverifiedShow Answer

-In the above figure, along the section of the demand curve between point a and point b, demand is

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Price elasticities are calculated for four goods, and the values are: 4.1; 3.7; 1.0; 0.002. Which price elasticity is most elastic?

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