Question 1

If demand is price elastic,a decrease in price causes:

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue. 
D)  an increase in quantity, but anything can happen to revenue. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue. 
D)  an increase in quantity, but anything can happen to revenue.

Question 2

Exhibit 5-4 Demand curves for silver
  
-Assume that a wealthy buyer,Mr.Hunt,declares that he will purchase any amount of silver at a price of $125 an ounce.In Exhibit 5-4,which graph illustrates the shape of the demand curve for silver?

Accepted Answer

A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D. 
A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D.

Question 3

Exhibit 5-1 Demand curves
  
-In Exhibit 5-1,the demand curve between points b and c is:

Accepted Answer

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

Question 4

If the price elasticity of demand is elastic,then:

Accepted Answer

A)  Ed < 1. 
B)  consumers are relatively not very responsive to a price increase. 
C)  an increase in the price will increase total revenue. 
D)  there are likely a large number of substitute products available. 
A)  Ed < 1. 
B)  consumers are relatively not very responsive to a price increase. 
C)  an increase in the price will increase total revenue. 
D)  there are likely a large number of substitute products available.

Question 5

If the demand curve is unit elastic,this implies that:

Accepted Answer

A)  consumers do not react to a change in product price. 
B)  the good can only be purchased in units of 1. 
C)  this good has no good substitutes. 
D)  the good is a basic food staple. 
E)  the percentage change in the quantity demanded = the percentage change in product price. 
A)  consumers do not react to a change in product price. 
B)  the good can only be purchased in units of 1. 
C)  this good has no good substitutes. 
D)  the good is a basic food staple. 
E)  the percentage change in the quantity demanded = the percentage change in product price.

Question 6

Which of the following events would increase the price elasticity of demand for Chicago Bears tickets that sell at a price of $20?

Accepted Answer

A) b and c. 
B) The Bears are having a successful season. 
C) The visiting team is having a successful season 
D) The Bears have been defeated in their previous seven games. 
E) The weather on game day will be warm. 
A) b and c. 
B) The Bears are having a successful season. 
C) The visiting team is having a successful season 
D) The Bears have been defeated in their previous seven games. 
E) The weather on game day will be warm.

Question 7

Suppose Good Food's supermarket raises the price of its steak and finds its total revenue from steak sales does not change.This is evidence that price elasticity of demand for steak is:

Accepted Answer

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

Question 8

Demand sensitivity depends on all of the following except:

Accepted Answer

A)  how low is the price of the good. 
B)  the sensitivity of firms' output to changes in its price. 
C)  the consumer's income. 
D)  the availability and closeness of substitutes. 
E)  the amount of time a consumer has to adjust to price changes. 
A)  how low is the price of the good. 
B)  the sensitivity of firms' output to changes in its price. 
C)  the consumer's income. 
D)  the availability and closeness of substitutes. 
E)  the amount of time a consumer has to adjust to price changes.

Question 9

Which of the following is true for a lower price elasticity of demand coefficient?

Accepted Answer

A)  The market is broadly defined. 
B)  The quantity demanded is more responsive. 
C)  Few substitutes exist. 
D)  Many substitutes exist. 
E)  All of the above. 
A)  The market is broadly defined. 
B)  The quantity demanded is more responsive. 
C)  Few substitutes exist. 
D)  Many substitutes exist. 
E)  All of the above.

Question 10

A measure of sensitivity or responsiveness to changes in price or income is called:

Accepted Answer

A)  elasticity. 
B)  technology. 
C)  supply and demand. 
D)  social pressure. 
E)  kickback. 
A)  elasticity. 
B)  technology. 
C)  supply and demand. 
D)  social pressure. 
E)  kickback.

Question 11

The price elasticity of demand coefficient for a good will be lower:

Accepted Answer

A)  if there are few substitutes for the good. 
B)  if expenditure on it is a small part of one's budget. 
C)  both a and b are true. 
D)  neither a nor b are true. 
A)  if there are few substitutes for the good. 
B)  if expenditure on it is a small part of one's budget. 
C)  both a and b are true. 
D)  neither a nor b are true.

Question 12

A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent.We can conclude that the demand for housing is:

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent,and as a result,the quantity of the dolls sold increases by 25 percent.This indicates that the price elasticity of demand for the dolls over this range is:

Accepted Answer

A)  2.5. 
B)  0.4. 
C)  0.5. 
D)  5.0. 
A)  2.5. 
B)  0.4. 
C)  0.5. 
D)  5.0.

Question 15

The price elasticity of demand measures consumer responsiveness to a price change.

Accepted Answer

A) True 
 B)False

Question 16

If a good has a price elasticity of demand coefficient greater than 1,total revenue can be increased by raising the price.

Accepted Answer

A) True 
 B)False

Question 17

One of the reasons that price elasticities of demand are always stated as positive numbers is because:

Accepted Answer

A)  the numerators and denominators of the formula are both negative. 
B)  the numerators and denominators of the formula are both positive. 
C)  price increases always lead to increases in quantity demanded. 
D)  price decreases always lead to decreases in quantity demanded. 
E)  price elasticities are always negative, so we ignore the sign. 
A)  the numerators and denominators of the formula are both negative. 
B)  the numerators and denominators of the formula are both positive. 
C)  price increases always lead to increases in quantity demanded. 
D)  price decreases always lead to decreases in quantity demanded. 
E)  price elasticities are always negative, so we ignore the sign.

Question 18

Elasticity is a measure of:

Accepted Answer

A)  the slope of a linear demand curve. 
B)  the slope of a supply curve. 
C)  relative responsiveness. 
D)  economic welfare. 
E)  consumer tastes. 
A)  the slope of a linear demand curve. 
B)  the slope of a supply curve. 
C)  relative responsiveness. 
D)  economic welfare. 
E)  consumer tastes.

Question 19

A product would be more demand price inelastic:

Accepted Answer

A)  the shorter the time the consumer has to adjust to price changes. 
B)  the higher the price of the good. 
C)  the more the number of good substitutes. 
D)  the less the essential nature of the good. 
E)  if the supply is more price elastic. 
A)  the shorter the time the consumer has to adjust to price changes. 
B)  the higher the price of the good. 
C)  the more the number of good substitutes. 
D)  the less the essential nature of the good. 
E)  if the supply is more price elastic.

Question 20

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup,and as a result,the quantity sold per day increased from 350 to 450.Over this price range,the price elasticity of demand for Starbucks coffee is:

Accepted Answer

A)  0.40. 
B)  0.80. 
C)  1.25. 
D)  2.50. 
A)  0.40. 
B)  0.80. 
C)  1.25. 
D)  2.50.

Exam 5: Price Elasticity of Demand

If demand is price elastic,a decrease in price causes:

Exhibit 5-4 Demand curves for silver -Assume that a wealthy buyer,Mr.Hunt,declares that he will purchase any amount of silver at a price of $125 an ounce.In Exhibit 5-4,which graph illustrates the shape of the demand curve for silver?

Exhibit 5-1 Demand curves -In Exhibit 5-1,the demand curve between points b and c is:

If the price elasticity of demand is elastic,then:

If the demand curve is unit elastic,this implies that:

Which of the following events would increase the price elasticity of demand for Chicago Bears tickets that sell at a price of $20?

Suppose Good Food's supermarket raises the price of its steak and finds its total revenue from steak sales does not change.This is evidence that price elasticity of demand for steak is:

Demand sensitivity depends on all of the following except:

Which of the following is true for a lower price elasticity of demand coefficient?

A measure of sensitivity or responsiveness to changes in price or income is called:

The price elasticity of demand coefficient for a good will be lower:

A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent.We can conclude that the demand for housing is:

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

Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent,and as a result,the quantity of the dolls sold increases by 25 percent.This indicates that the price elasticity of demand for the dolls over this range is:

The price elasticity of demand measures consumer responsiveness to a price change.

If a good has a price elasticity of demand coefficient greater than 1,total revenue can be increased by raising the price.

One of the reasons that price elasticities of demand are always stated as positive numbers is because:

Elasticity is a measure of:

A product would be more demand price inelastic:

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup,and as a result,the quantity sold per day increased from 350 to 450.Over this price range,the price elasticity of demand for Starbucks coffee is:

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

Filters