Question 1

Consider the market for bicycles.If a dealer cuts prices by 10 percent and sells 20 percent more bikes,then demand for bicycles is:

Accepted Answer

A)  inelastic, and total revenue will increase. 
B)  elastic, and total revenue will increase. 
C)  inelastic, and total revenue will decrease. 
D)  elastic, and total revenue will decrease. 
E)  unit elastic, and total revenue will remain the same. 
A)  inelastic, and total revenue will increase. 
B)  elastic, and total revenue will increase. 
C)  inelastic, and total revenue will decrease. 
D)  elastic, and total revenue will decrease. 
E)  unit elastic, and total revenue will remain the same.

Question 2

Exhibit 5-6 Demand curve for concert tickets
  
-In Exhibit 5-6,if promoters lower their ticket price form $30 to $20,then:

Accepted Answer

A)  they will receive less money from their ticket sales. 
B)  people will continue to buy the same number of tickets. 
C)  customers will spend less total money on concert tickets. 
D)  both ticket sales and total revenue will rise. 
A)  they will receive less money from their ticket sales. 
B)  people will continue to buy the same number of tickets. 
C)  customers will spend less total money on concert tickets. 
D)  both ticket sales and total revenue will rise.

Question 3

If demand is perfectly inelastic,then the demand curve will be vertical.

Accepted Answer

A) True 
 B)False

Question 4

On a part of the demand curve where the price elasticity of demand is less than 1,a decrease in price:

Accepted Answer

A)  is impossible. 
B)  will increase total revenue. 
C)  will decrease total revenue. 
D)  raises the price elasticity of demand. 
E)  decreases quantity demanded. 
A)  is impossible. 
B)  will increase total revenue. 
C)  will decrease total revenue. 
D)  raises the price elasticity of demand. 
E)  decreases quantity demanded.

Question 5

Dana is an art historian who needs to travel to Italy to do research.Art historians usually don't have a lot of money,and therefore are very sensitive to price changes.Dana's funding agency pays her a fixed amount to travel.At current exchange rates,Dana can stay in Italy for 35 days.If the exchange rate improves by 10 percent,she can stay for 40 days.What is Dana's price elasticity of demand for days spent in Italy?

Accepted Answer

A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.4. 
D)  It is approximately equal to 0.4. 
E)  It is approximately equal to 0.1. 
A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.4. 
D)  It is approximately equal to 0.4. 
E)  It is approximately equal to 0.1.

Question 6

Sally is an average shopper,with average income.When she is in the store she buys a few items which cost more than $20,several items which cost between $5 and $20,and many items which cost less than $1.The price elasticity of Sally's demand for these goods most likely ____.

Accepted Answer

A)  increases as the price decreases 
B)  decreases as the price decreases 
C)  increases as the price increases 
D)  decreases as the price increases 
E)  remains constant over all price ranges 
A)  increases as the price decreases 
B)  decreases as the price decreases 
C)  increases as the price increases 
D)  decreases as the price increases 
E)  remains constant over all price ranges

Question 7

Price elasticity of demand is defined as the ratio of the:

Accepted Answer

A)  percentage increase in price to an increase in quantity demanded. 
B)  unit change in quantity demanded to the dollar change in price. 
C)  maximum amount that consumers will pay to increase quantity. 
D)  percentage change in quantity demanded to the percentage change in price, other things being equal. 
A)  percentage increase in price to an increase in quantity demanded. 
B)  unit change in quantity demanded to the dollar change in price. 
C)  maximum amount that consumers will pay to increase quantity. 
D)  percentage change in quantity demanded to the percentage change in price, other things being equal.

Question 8

If a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent,demand is elastic.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel.The price elasticity of demand in this range of the demand curve is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  infinitely elastic. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  infinitely elastic.

Question 10

Demand price elasticity measures:

Accepted Answer

A)  how much supply will change as price changes. 
B)  how consumers change their purchases in response to a change in income. 
C)  how consumers change their purchases in response to a change in the price of a substitute good. 
D)  how consumers change their purchases in response to a change in the price of a product. 
E)  the change in price brought about by a change in consumer demand. 
A)  how much supply will change as price changes. 
B)  how consumers change their purchases in response to a change in income. 
C)  how consumers change their purchases in response to a change in the price of a substitute good. 
D)  how consumers change their purchases in response to a change in the price of a product. 
E)  the change in price brought about by a change in consumer demand.

Question 11

Exhibit 5-6 Demand curve for concert tickets
  
-In Exhibit 5-6,suppose promoters charge a price of $30 per ticket.How much total revenue will their sales generate?

Accepted Answer

A)  $300,000. 
B)  $400,000. 
C)  $500,000. 
D)  $600,000. 
A)  $300,000. 
B)  $400,000. 
C)  $500,000. 
D)  $600,000.

Question 12

What does the "price elasticity of demand" measure? What does a price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic,unitary elastic or inelastic demand?

Accepted Answer

The price elasticity of demand measures

Question 13

In the short run,consumers typically ____ to price changes (when compared to the long run).

Accepted Answer

A)  are very responsive 
B)  are more demand sensitive 
C)  are less demand sensitive 
D)  do not respond at all 
E)  overreact 
A)  are very responsive 
B)  are more demand sensitive 
C)  are less demand sensitive 
D)  do not respond at all 
E)  overreact

Question 14

Governments can use price elasticity of demand to estimate how changes in excise tax rates will affect:

Accepted Answer

A)  income. 
B)  prices. 
C)  tax revenues. 
D)  government spending. 
E)  profits. 
A)  income. 
B)  prices. 
C)  tax revenues. 
D)  government spending. 
E)  profits.

Question 15

Exhibit 5-9 Supply and demand curves for good X
  
-As shown in Exhibit 5-9,the price elasticity of demand for good X between points E and D is:

Accepted Answer

A)  1/5 = 0.20. 
B)  3/7 = 0.43. 
C)  1/2 = 0.50. 
D)  1. 
A)  1/5 = 0.20. 
B)  3/7 = 0.43. 
C)  1/2 = 0.50. 
D)  1.

Question 16

Avital and Joshua each have their own business selling lemonade in front of their houses.When they each charge 25 cents per glass,their total revenues are equal.However,when they each charge 40 cents per glass,Avital's revenues are bigger than Joshua's revenues.This is because:

Accepted Answer

A)  Joshua faces a more inelastic demand curve. 
B)  Avital faces a more elastic demand curve. 
C)  Joshua faces a more elastic demand curve. 
D)  Avital faces a less inelastic demand curve. 
E)  there is a market failure. 
A)  Joshua faces a more inelastic demand curve. 
B)  Avital faces a more elastic demand curve. 
C)  Joshua faces a more elastic demand curve. 
D)  Avital faces a less inelastic demand curve. 
E)  there is a market failure.

Question 17

Exhibit 5-5 Demand curve for computers
  
-In Exhibit 5-5,if the area OABC equals the area ODEF,the demand curve is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  nonelastic. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  nonelastic.

Question 18

If the percentage change in the quantity demanded of a good is greater than the percentage change in price,price elasticity of demand is:

Accepted Answer

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

Question 19

The president of Tucker Motors says,"Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  unitary elastic. 
D)  elastic. 
E)  inelastic. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  unitary elastic. 
D)  elastic. 
E)  inelastic.

Question 20

Elasticity measures how "sensitive" consumers are by measuring their change in ____ as the price of the product changes.

Accepted Answer

A)  attitude 
B)  income 
C)  quantity demanded 
D)  supply 
E)  taxes 
A)  attitude 
B)  income 
C)  quantity demanded 
D)  supply 
E)  taxes

Exam 5: Price Elasticity of Demand

Consider the market for bicycles.If a dealer cuts prices by 10 percent and sells 20 percent more bikes,then demand for bicycles is:

Exhibit 5-6 Demand curve for concert tickets -In Exhibit 5-6,if promoters lower their ticket price form $30 to $20,then:

If demand is perfectly inelastic,then the demand curve will be vertical.

On a part of the demand curve where the price elasticity of demand is less than 1,a decrease in price:

Sally is an average shopper,with average income.When she is in the store she buys a few items which cost more than $20,several items which cost between $5 and $20,and many items which cost less than $1.The price elasticity of Sally's demand for these goods most likely ____.

Price elasticity of demand is defined as the ratio of the:

If a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent,demand is elastic.

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel.The price elasticity of demand in this range of the demand curve is:

Demand price elasticity measures:

Exhibit 5-6 Demand curve for concert tickets -In Exhibit 5-6,suppose promoters charge a price of $30 per ticket.How much total revenue will their sales generate?

What does the "price elasticity of demand" measure? What does a price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic,unitary elastic or inelastic demand?

In the short run,consumers typically ____ to price changes (when compared to the long run).

Governments can use price elasticity of demand to estimate how changes in excise tax rates will affect:

Exhibit 5-9 Supply and demand curves for good X -As shown in Exhibit 5-9,the price elasticity of demand for good X between points E and D is:

Avital and Joshua each have their own business selling lemonade in front of their houses.When they each charge 25 cents per glass,their total revenues are equal.However,when they each charge 40 cents per glass,Avital's revenues are bigger than Joshua's revenues.This is because:

Exhibit 5-5 Demand curve for computers -In Exhibit 5-5,if the area OABC equals the area ODEF,the demand curve is:

If the percentage change in the quantity demanded of a good is greater than the percentage change in price,price elasticity of demand is:

The president of Tucker Motors says,"Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Elasticity measures how "sensitive" consumers are by measuring their change in ____ as the price of the product changes.

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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