Question 1

Along a straight-line supply curve:

Accepted Answer

A) elasticity rises as price rises. 
B) elasticity declines as price declines. 
C) elasticity is equal to slope. 
D) the change in elasticity depends on the supply curve in question. 
A) elasticity rises as price rises. 
B) elasticity declines as price declines. 
C) elasticity is equal to slope. 
D) the change in elasticity depends on the supply curve in question.

Question 2

Five brief scenarios are presented below.Apply the correct elasticity term to each scenario and explain your answer.
(a)John must have an appendectomy.Upon arriving at the hospital he is told that for this week only they are doing abdominal operations at half price.Even in the face of a 50 percent price cut,John insists that he wants only one operation.
(b)Apple announces that it is willing to sell as many model 3000 computers as are ordered at a fixed price of $500 per unit.
(c)Northwest Airlines increased all its fares by 25 percent.As a result the number of passengers declined by 25 percent and the total revenue of Northwest Airlines remained the same.
(d)Newsweek magazine raised its price to annual subscribers by 50 percent.As a result annual subscriptions fell by 30 percent.Although it lost some readership,Newsweek significantly increased its revenues.
(e)The price of soybeans went up by 60 percent.In response farmers planted more soybeans and output increase by 70 percent.

Accepted Answer

(a)John had a perfectly inelastic demand

Question 3

The price elasticity of supply is the:

Accepted Answer

A) change in the quantity supplied divided by the change in price. 
B) percentage change in the quantity supplied divided by the percentage change in price. 
C) change in the price divided by the change in the quantity supplied. 
D) percentage change in the price divided by the percentage change in the quantity supplied. 
A) change in the quantity supplied divided by the change in price. 
B) percentage change in the quantity supplied divided by the percentage change in price. 
C) change in the price divided by the change in the quantity supplied. 
D) percentage change in the price divided by the percentage change in the quantity supplied.

Question 4

Refer to the graph shown. Which supply curve is inelastic?

Accepted Answer

A) A 
B) B 
C) C 
D) None of the answers is correct. 
A) A 
B) B 
C) C 
D) None of the answers is correct.

Question 5

Refer to the following graph.   Which of the following curves demonstrates a unit elastic demand curve? (That is, a curve where elasticity is 1 at each point. )

Accepted Answer

A) A 
B) B 
C) C 
D) None of the answers is correct. 
A) A 
B) B 
C) C 
D) None of the answers is correct.

Question 6

An economist estimates that for every 1 percent increase in the price of natural Christmas trees, the demand for artificial trees rises by .2 percent. From this information one can conclude that:

Accepted Answer

A) the income elasticity of demand for natural Christmas trees is less than 1. 
B) natural Christmas trees are luxuries. 
C) natural and artificial Christmas trees are substitutes. 
D) natural and artificial Christmas trees are complements. 
A) the income elasticity of demand for natural Christmas trees is less than 1. 
B) natural Christmas trees are luxuries. 
C) natural and artificial Christmas trees are substitutes. 
D) natural and artificial Christmas trees are complements.

Question 7

Refer to the graph shown. Which point has an elasticity less than 1?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 8

Bill's Homemade Pizza recently increased the price of its super jumbo size pepperoni pizza by 12%.As a result of this price increase the quantity demanded for this type of pizza decreased by 3%.What is the price elasticity of demand for Bill's super jumbo size pepperoni pizza?

Accepted Answer

E = 3/12 =

Question 9

Under which of the following two scenarios would demand be more elastic? Explain.
(a)Demand for blood pressure medicine by those with high blood pressure.
(b)Demand for chemical-free hair coloring.

Accepted Answer

Demand will be more elastic in the secon

Question 10

If demand is highly elastic and supply shifts to the left:

Accepted Answer

A) price will rise significantly; quantity hardly changes at all. 
B) price will hardly change at all; quantity will decline significantly. 
C) price will rise significantly and quantity will fall significantly. 
D) price and quantity will hardly change at all. 
A) price will rise significantly; quantity hardly changes at all. 
B) price will hardly change at all; quantity will decline significantly. 
C) price will rise significantly and quantity will fall significantly. 
D) price and quantity will hardly change at all.

Question 11

Refer to the graph shown. For which curve does the price elasticity of supply decrease as price increases?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 12

Refer to the following graph.   Elasticity is smallest at which point?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 13

Define the price elasticity of demand and the price elasticity of supply.What is the difference between elastic and inelastic demand?

Accepted Answer

The price elasticity of demand is a meas

Question 14

What is the income elasticity of demand?

Accepted Answer

The income elasticity of demand measures

Question 15

Refer to the graph shown. When price is $40, revenue equals areas:

Accepted Answer

A) A only. 
B) A and B only. 
C) A, B, and D only. 
D) A, B, C, D, and E. 
A) A only. 
B) A and B only. 
C) A, B, and D only. 
D) A, B, C, D, and E.

Question 16

Refer to the following graph.   If price is currently at B and rises, total revenue will rise.

Accepted Answer

A) True 
 B)False

Question 17

The Honolulu tourism commission proposed a 6 percent tax on hotel rooms to pay for an outdoor amphitheater. A Purdue University economist estimates that the tax would result in a 6 percent increase in the price of hotel rooms. If the elasticity of demand is 1.33, what is the expected change in quantity demanded?

Accepted Answer

A) 12.5 percent 
B) −12.5 percent 
C) 8 percent 
D) −8 percent 
A) 12.5 percent 
B) −12.5 percent 
C) 8 percent 
D) −8 percent

Question 18

If milk and cookies are complements and the price of cookies rises, we would expect to see:

Accepted Answer

A) an increase in the demand for milk. 
B) a decrease in the demand for milk. 
C) an increase in the quantity demanded for milk but no change in demand. 
D) a decrease in the quantity demanded for milk but no change in demand. 
A) an increase in the demand for milk. 
B) a decrease in the demand for milk. 
C) an increase in the quantity demanded for milk but no change in demand. 
D) a decrease in the quantity demanded for milk but no change in demand.

Question 19

If the elasticity of demand for electricity is 0.13, the demand for electricity is:

Accepted Answer

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

Question 20

Refer to the following table to answer the question. Supply shown by the table is: $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity Demanded } \
\hline \$ 6.00 & \mathbf { 8 0 } \
\hline \$ 8.00 & 90 \
\hline \$ 10.00 & 100 \
\hline \$ 12.00 & 110 \
\hline \$ 14.00 & 120 \
\hline
\end{array}$$

Accepted Answer

A) elastic. 
B) unit elastic. 
C) inelastic. 
D) changing as price changes. 
A) elastic. 
B) unit elastic. 
C) inelastic. 
D) changing as price changes.

Exam 6: Describing Supply and Demand: Elasticities

Along a straight-line supply curve:

The price elasticity of supply is the:

Refer to the graph shown. Which supply curve is inelastic?

Refer to the following graph. Which of the following curves demonstrates a unit elastic demand curve? (That is, a curve where elasticity is 1 at each point. )

An economist estimates that for every 1 percent increase in the price of natural Christmas trees, the demand for artificial trees rises by .2 percent. From this information one can conclude that:

Refer to the graph shown. Which point has an elasticity less than 1?

Bill's Homemade Pizza recently increased the price of its super jumbo size pepperoni pizza by 12%.As a result of this price increase the quantity demanded for this type of pizza decreased by 3%.What is the price elasticity of demand for Bill's super jumbo size pepperoni pizza?

Under which of the following two scenarios would demand be more elastic? Explain. (a)Demand for blood pressure medicine by those with high blood pressure. (b)Demand for chemical-free hair coloring.

If demand is highly elastic and supply shifts to the left:

Refer to the graph shown. For which curve does the price elasticity of supply decrease as price increases?

Refer to the following graph. Elasticity is smallest at which point?

Define the price elasticity of demand and the price elasticity of supply.What is the difference between elastic and inelastic demand?

What is the income elasticity of demand?

Refer to the graph shown. When price is $40, revenue equals areas:

Refer to the following graph. If price is currently at B and rises, total revenue will rise.

If milk and cookies are complements and the price of cookies rises, we would expect to see:

If the elasticity of demand for electricity is 0.13, the demand for electricity is:

Refer to the following table to answer the question. Supply shown by the table is: Price Quantity Demanded \ 6.00 \ 8.00 90 \ 10.00 100 \ 12.00 110 \ 14.00 120

Economics and Economic Reasoning

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Supply and Demand

Using Supply and Demand

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