Question 1

Suppose that a 15 percent decrease in price leads to an increase in the quantity demanded of 10 percent,

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) elasticity of demand is unitary. 
D) None of the above is correct. 
A) demand is elastic. 
B) demand is inelastic. 
C) elasticity of demand is unitary. 
D) None of the above is correct.

Question 2

Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.

Accepted Answer

A) True 
 B)False

Question 3

A fall in the price of a competing product will produce an outward shift in the demand curve for most products.

Accepted Answer

A) True 
 B)False

Question 4

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls.The price elasticity for compressed air is

Accepted Answer

A) 2 
B) 1/2. 
C) 1 
D) 20 
A) 2 
B) 1/2. 
C) 1 
D) 20

Question 5

The ratio of the percentage change in quantity demanded to the percentage change in income is known as the cross elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 6

The relationships between elasticity and total revenue hold because

Accepted Answer

A) total revenue equals price divided by quantity demanded. 
B) total revenue equals price times quantity demanded. 
C) a drop in price has two opposing effects on the two components of the formula. 
D) both b and c are true. 
A) total revenue equals price divided by quantity demanded. 
B) total revenue equals price times quantity demanded. 
C) a drop in price has two opposing effects on the two components of the formula. 
D) both b and c are true.

Question 7

The demand for a product is inelastic whenever

Accepted Answer

A) the percentage change in quantity demanded is less than the percentage change in price. 
B) the percentage change in quantity demanded is higher than the percentage changes in price. 
C) the percentage change in quantity demanded is equal to the percentage changes in price. 
D) the quantity demanded changes by zero when price changes. 
A) the percentage change in quantity demanded is less than the percentage change in price. 
B) the percentage change in quantity demanded is higher than the percentage changes in price. 
C) the percentage change in quantity demanded is equal to the percentage changes in price. 
D) the quantity demanded changes by zero when price changes.

Question 8

Figure 6-2  
-In Figure 6-2, the price elasticity of demand (dropping all minus signs) is ____ between P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices the percentage change in price is ____.

Accepted Answer

A) smaller; smaller 
B) smaller; greater 
C) greater; smaller 
D) greater; greater 
A) smaller; smaller 
B) smaller; greater 
C) greater; smaller 
D) greater; greater

Question 9

A negative cross elasticity indicates that two goods are complements.

Accepted Answer

A) True 
 B)False

Question 10

The elasticity of demand for gasoline is likely to be relatively low in the short term and higher as the period of time gets longer.

Accepted Answer

A) True 
 B)False

Question 11

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

Accepted Answer

A) True 
 B)False

Question 12

A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 13

Big Alice Ice Cream Parlor reduced its price of an ice cream cone from $1 to 90 cents.Sales consequently increased from 1,000 cones per week to 1,050 cones per week.The approximate price elasticity is

Accepted Answer

A) 0.20. 
B) 0.46. 
C) 2.16. 
D) 5.00. 
A) 0.20. 
B) 0.46. 
C) 2.16. 
D) 5.00.

Question 14

If the reciprocal of the slope of a demand curve is calculated, this value is equal to the price elasticity of demand for that good.

Accepted Answer

A) True 
 B)False

Question 15

The formula for price elasticity of demand that is used in practice

Accepted Answer

A) usually drops all minus signs. 
B) usually takes on different values at different points on the demand curve. 
C) may calculate the percentage change in price between P1 and P2 as "(P2 − P1) as a percentage of (P1 + P2)/2." 
D) All of the responses are correct. 
A) usually drops all minus signs. 
B) usually takes on different values at different points on the demand curve. 
C) may calculate the percentage change in price between P1 and P2 as "(P2 − P1) as a percentage of (P1 + P2)/2." 
D) All of the responses are correct.

Question 16

Figure 6-5  
-In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,

Accepted Answer

A) total expenditure remains unchanged. 
B) total expenditure increases. 
C) total expenditure decreases. 
D) total expenditure first increases and then declines. 
A) total expenditure remains unchanged. 
B) total expenditure increases. 
C) total expenditure decreases. 
D) total expenditure first increases and then declines.

Question 17

If demand for a seller's product is elastic, a price increase will decrease total revenue.

Accepted Answer

A) True 
 B)False

Question 18

The term "unit elasticity" is used to describe a situation in which a rise in price is accompanied by

Accepted Answer

A) a fall in total expenditure. 
B) a rise in total expenditure. 
C) constant total expenditure. 
D) a unit decrease in total expenditure. 
A) a fall in total expenditure. 
B) a rise in total expenditure. 
C) constant total expenditure. 
D) a unit decrease in total expenditure.

Question 19

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

Accepted Answer

A) True 
 B)False

Question 20

A price increase will always cause a firm's revenue to fall because they will sell less of the good.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

Suppose that a 15 percent decrease in price leads to an increase in the quantity demanded of 10 percent,

Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.

A fall in the price of a competing product will produce an outward shift in the demand curve for most products.

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls.The price elasticity for compressed air is

The ratio of the percentage change in quantity demanded to the percentage change in income is known as the cross elasticity of demand.

The relationships between elasticity and total revenue hold because

The demand for a product is inelastic whenever

Figure 6-2 -In Figure 6-2, the price elasticity of demand (dropping all minus signs) is ____ between P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices the percentage change in price is ____.

A negative cross elasticity indicates that two goods are complements.

The elasticity of demand for gasoline is likely to be relatively low in the short term and higher as the period of time gets longer.

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.

Big Alice Ice Cream Parlor reduced its price of an ice cream cone from $1 to 90 cents.Sales consequently increased from 1,000 cones per week to 1,050 cones per week.The approximate price elasticity is

If the reciprocal of the slope of a demand curve is calculated, this value is equal to the price elasticity of demand for that good.

The formula for price elasticity of demand that is used in practice

Figure 6-5 -In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,

If demand for a seller's product is elastic, a price increase will decrease total revenue.

The term "unit elasticity" is used to describe a situation in which a rise in price is accompanied by

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

A price increase will always cause a firm's revenue to fall because they will sell less of the good.

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

Filters

Figure 6-2 -In Figure 6-2, the price elasticity of demand (dropping all minus signs) is between P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices the percentage change in price is .