Question 1

If a price decrease of a product significantly raises its revenues, then the absolute price elasticity of demand for that product must be

Accepted Answer

A)   less than one.
B)   equal to one.
C)   greater than one.
D)   an example of unit elasticity.E) A) and D)
F) A) and C)

Question 2

Charlie's income went from $1000 per week to $1500 per week. As a result he increased his consumption of beef from 1 pound a week to 3 pounds a week. Based on his consumption patterns, the income elasticity of beef for Charlie is

Accepted Answer

A)   2.50.
B)   -.50.
C)   .50.
D)   -1.50.E) A) and B)
F) B) and D)

Question 3

If a good has an absolute price elasticity of 4, the demand for the good is

Accepted Answer

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

Question 4

A vertical supply curve may be described as being

Accepted Answer

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

Question 5

Suppose that when the price of donuts rises 10%, the quantity demanded of donuts falls 3%. Based on this information, what is the approximate absolute price elasticity of demand for donuts?

Accepted Answer

A)   3.33
B)   0.3
C)   30
D)   1.3E) B) and C)
F) None of the above

Question 6

"Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

Accepted Answer

Disagree. A vertical demand curve implie...

Question 7

If the supply of a good is perfectly inelastic, the price elasticity of supply will equal

Accepted Answer

A)   positive infinity.
B)   one.
C)   zero.
D)   none of the above.E) B) and C)
F) All of the above

Question 8

"Higher prices always yield higher revenues." Do you agree or disagree? Why?

Accepted Answer

Disagree. Higher prices generate higher ...

Question 9

An inferior good has an income elasticity of demand that is

Accepted Answer

A)   positive.
B)   negative.
C)   positive but less than 1.
D)   zero.E) All of the above
F) B) and D)

Question 10

-According to the above table, what is the absolute price elasticity of demand when price rises from $5.50 to $6?

Accepted Answer

A)   4.00
B)   2.23
C)   1.21
D)   0.50E) None of the above
F) A) and D)

Question 11

When there are very few substitutes for a good, the demand for the good will tend to be

Accepted Answer

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

Question 12

When the absolute price elasticity of demand is less than 1, demand is

Accepted Answer

A)   elastic.
B)   unit-elastic.
C)   inelastic.
D)   undetermined without more information.E) None of the above
F) A) and B)

Question 13

If goods are completely unrelated, their cross price elasticity will

Accepted Answer

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

Question 14

The word best associated with price elasticity of demand is

Accepted Answer

A)   relative.
B)   total.
C)   absolute.
D)   unit.E) C) and D)
F) None of the above

Question 15

The income elasticity of demand

Accepted Answer

A)   is positive only.
B)   is negative only.
C)   must lie between -1 and +1.
D)   can be positive, negative, or zero.E) B) and C)
F) A) and D)

Question 16

-In the above figure, along which range would the demand for this good be most elastic?

Accepted Answer

A)   between point a and point b
B)   between point c and point d
C)   between point d and point e
D)   at point eE) A) and B)
F) All of the above

Question 17

The price elasticity of demand can be computed as

Accepted Answer

A)   change in total utility/change in quantity.
B)   change in price/change in quantity demanded.
C)   percentage change in quantity demanded/percentage change in price.
D)   change in quantity demanded/change in price.E) B) and C)
F) C) and D)

Question 18

Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand

Accepted Answer

A)   is constant.
B)   increases continuously.
C)   decreases continuously.
D)   may either increase or decrease.E) C) and D)
F) B) and D)

Question 19

Relative percentage changes are used in measuring price elasticity of demand, so that

Accepted Answer

A)   it does not matter whether price increases or decreases when calculating the elasticity.
B)   it does not matter what units are used to measure prices or quantities.
C)   we always obtain a positive number.
D)   larger numbers indicate greater responsiveness.E) All of the above
F) A) and D)

Question 20

The longer any price change persists, the

Accepted Answer

A)   more difficult it is to alter quantity demanded.
B)   greater is the price elasticity of demand.
C)   lower is the price elasticity of demand.
D)   more likely price will return to its original level.E) None of the above
F) All of the above

Exam 19: Demand and Supply Elasticity

"Higher prices always yield higher revenues." Do you agree or disagree? Why?

Correct AnswerverifiedDisagree. Higher prices generate higher ...View AnswerShow Answer

Suppose that when the price of donuts rises 10%, the quantity demanded of donuts falls 3%. Based on this information, what is the approximate absolute price elasticity of demand for donuts?

Correct AnswerverifiedShow Answer

If the supply of a good is perfectly inelastic, the price elasticity of supply will equal

Correct AnswerverifiedShow Answer

If a good has an absolute price elasticity of 4, the demand for the good is

Correct AnswerverifiedShow Answer

"Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

Correct AnswerverifiedDisagree. A vertical demand curve implie...View AnswerShow Answer

A vertical supply curve may be described as being

Correct AnswerverifiedShow Answer

Charlie's income went from $1000 per week to $1500 per week. As a result he increased his consumption of beef from 1 pound a week to 3 pounds a week. Based on his consumption patterns, the income elasticity of beef for Charlie is

Correct AnswerverifiedShow Answer

-According to the above table, what is the absolute price elasticity of demand when price rises from $5.50 to $6?

Correct AnswerverifiedShow Answer

The price elasticity of demand can be computed as

Correct AnswerverifiedShow Answer

If a price decrease of a product significantly raises its revenues, then the absolute price elasticity of demand for that product must be

Correct AnswerverifiedShow Answer

The income elasticity of demand

Correct AnswerverifiedShow Answer

Relative percentage changes are used in measuring price elasticity of demand, so that

Correct AnswerverifiedShow Answer

The word best associated with price elasticity of demand is

Correct AnswerverifiedShow Answer

-In the above figure, along which range would the demand for this good be most elastic?

Correct AnswerverifiedShow Answer

The longer any price change persists, the

Correct AnswerverifiedShow Answer

When the absolute price elasticity of demand is less than 1, demand is

Correct AnswerverifiedShow Answer

If goods are completely unrelated, their cross price elasticity will

Correct AnswerverifiedShow Answer

Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand

Correct AnswerverifiedShow Answer

An inferior good has an income elasticity of demand that is

Correct AnswerverifiedShow Answer

When there are very few substitutes for a good, the demand for the good will tend to be

Correct AnswerverifiedShow Answer

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Disagree. Higher prices generate higher ...
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Disagree. A vertical demand curve implie...
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