Question 1

Other things constant,the price elasticity of demand for a product will be smaller (more inelastic)if:

Accepted Answer

A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product. 
A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product.

Question 2

Exhibit 5-3 Demand curves for gallons of orange juice
  
-Using Exhibit 5-3,whose "quantity demanded" experiences the largest percentage increase when the price falls from $2 to $1?

Accepted Answer

A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward 
A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward

Question 3

An economist estimates that .67 is the price elasticity of demand for disposable diapers.This suggests that disposable diaper producers could:

Accepted Answer

A)  advertise more to raise the price elasticity of demand. 
B)  encourage more parents to use cloth diapers. 
C)  lower the price of disposable diapers to raise more revenue. 
D)  raise the price of disposable diapers to raise more revenue. 
E)  maximize revenues by staying at the current price. 
A)  advertise more to raise the price elasticity of demand. 
B)  encourage more parents to use cloth diapers. 
C)  lower the price of disposable diapers to raise more revenue. 
D)  raise the price of disposable diapers to raise more revenue. 
E)  maximize revenues by staying at the current price.

Question 4

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen,and as a result,the daily sales increased from 300 to 400 dozen.This indicates that the price elasticity of demand for the doughnuts was:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  indeterminate; more information is needed to determine the price elasticity of demand. 
A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  indeterminate; more information is needed to determine the price elasticity of demand.

Question 5

A health club sells 50 memberships when the monthly price is $60 and 70 memberships when the monthly price is $40.The price elasticity of demand for memberships at this health club is (using the average values method):

Accepted Answer

A)  0.25. 
B)  0.6. 
C)  1.0. 
D)  1.1. 
E)  0.83 
A)  0.25. 
B)  0.6. 
C)  1.0. 
D)  1.1. 
E)  0.83

Question 6

Since it is always a negative number,economists use the convention of taking the absolute value of:

Accepted Answer

A)  income elasticity of demand. 
B)  cross price elasticity of demand. 
C)  price elasticity of supply. 
D)  price elasticity of demand. 
E)  any elasticity calculation. 
A)  income elasticity of demand. 
B)  cross price elasticity of demand. 
C)  price elasticity of supply. 
D)  price elasticity of demand. 
E)  any elasticity calculation.

Question 7

If a demand curve for a good were completely vertical,it would be considered:

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  of unitary elasticity. 
D)  relatively inelastic. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  of unitary elasticity. 
D)  relatively inelastic.

Question 8

It is Valentine's Day and Jason is desperately looking all over town for a dozen roses to give to Judy.Most likely,Jason's price elasticity of demand is:

Accepted Answer

A)  infinitely large. 
B)  negative. 
C)  equal to one. 
D)  greater than one. 
E)  less than one. 
A)  infinitely large. 
B)  negative. 
C)  equal to one. 
D)  greater than one. 
E)  less than one.

Question 9

A demand curve that has constant price elasticity of demand coefficient equals to one at all points is a(n):

Accepted Answer

A)  rectangular hyperbola. 
B)  downward-sloping straight line. 
C)  upward-sloping straight line. 
D)  none of the above. 
A)  rectangular hyperbola. 
B)  downward-sloping straight line. 
C)  upward-sloping straight line. 
D)  none of the above.

Question 10

Exhibit 5-3 Demand curves for gallons of orange juice
  
-Using Exhibit 5-3,in general,whose demand for orange juice is the most inelastic?

Accepted Answer

A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward 
A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward

Question 11

Suppose an economist found that total revenues increase for the bus system when fares were raised,the conclusion is that the price elasticity demand for subway services over the range of fare increase is inelastic.

Accepted Answer

A) True 
 B)False

Question 12

Firms would like to know the price elasticity of demand for their products because it helps determine the effect of price changes on the firms':

Accepted Answer

A)  property taxes. 
B)  competitors' profits. 
C)  quantity supplied. 
D)  revenues. 
E)  total costs. 
A)  property taxes. 
B)  competitors' profits. 
C)  quantity supplied. 
D)  revenues. 
E)  total costs.

Question 13

Exhibit 5-5 Demand curve for computers
  
-In Exhibit 5-5,the total revenue at point E on the demand curve equals:

Accepted Answer

A)  OD. 
B)  FE. 
C)  DE. 
D)  ODEF. 
E)  None of the above. 
A)  OD. 
B)  FE. 
C)  DE. 
D)  ODEF. 
E)  None of the above.

Question 14

Price elasticity remains constant along a straight-line demand curve.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following factors is associated with products with a highly price elastic demand?

Accepted Answer

A)  Few close substitutes. 
B)  A very short time period for consumers to respond to price changes. 
C)  Many very close substitutes. 
D)  A per unit price that is only a very small portion of most peoples' budgets. 
A)  Few close substitutes. 
B)  A very short time period for consumers to respond to price changes. 
C)  Many very close substitutes. 
D)  A per unit price that is only a very small portion of most peoples' budgets.

Question 16

Which statement about price elasticity of demand along a linear demand curve is true?

Accepted Answer

A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases. 
E)  When an individual buys 4 units of a good his/her elasticity of demand for each unit increases. 
A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases. 
E)  When an individual buys 4 units of a good his/her elasticity of demand for each unit increases.

Question 17

Elasticity has which special meaning for economists?

Accepted Answer

A) b and c. 
B) A ratio of percentage changes. 
C) How easily prices adjust to market changes. 
D) How price changes as quantities demanded change. 
E) When consumers will no longer react to price changes. 
A) b and c. 
B) A ratio of percentage changes. 
C) How easily prices adjust to market changes. 
D) How price changes as quantities demanded change. 
E) When consumers will no longer react to price changes.

Question 18

If a decrease in the price of football tickets increases the total revenue of the athletic department,this is evidence that demand is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unit elastic with respect to price. 
D)  perfectly inelastic. 
A)  price elastic. 
B)  price inelastic. 
C)  unit elastic with respect to price. 
D)  perfectly inelastic.

Question 19

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 20

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

Accepted Answer

A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short-run. 
D)  if a small portion of the budget will be spent on it. 
A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short-run. 
D)  if a small portion of the budget will be spent on it.

Exam 5: Price Elasticity of Demand

Other things constant,the price elasticity of demand for a product will be smaller (more inelastic)if:

Exhibit 5-3 Demand curves for gallons of orange juice -Using Exhibit 5-3,whose "quantity demanded" experiences the largest percentage increase when the price falls from $2 to $1?

An economist estimates that .67 is the price elasticity of demand for disposable diapers.This suggests that disposable diaper producers could:

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen,and as a result,the daily sales increased from 300 to 400 dozen.This indicates that the price elasticity of demand for the doughnuts was:

A health club sells 50 memberships when the monthly price is $60 and 70 memberships when the monthly price is $40.The price elasticity of demand for memberships at this health club is (using the average values method):

Since it is always a negative number,economists use the convention of taking the absolute value of:

If a demand curve for a good were completely vertical,it would be considered:

It is Valentine's Day and Jason is desperately looking all over town for a dozen roses to give to Judy.Most likely,Jason's price elasticity of demand is:

A demand curve that has constant price elasticity of demand coefficient equals to one at all points is a(n):

Exhibit 5-3 Demand curves for gallons of orange juice -Using Exhibit 5-3,in general,whose demand for orange juice is the most inelastic?

Suppose an economist found that total revenues increase for the bus system when fares were raised,the conclusion is that the price elasticity demand for subway services over the range of fare increase is inelastic.

Firms would like to know the price elasticity of demand for their products because it helps determine the effect of price changes on the firms':

Exhibit 5-5 Demand curve for computers -In Exhibit 5-5,the total revenue at point E on the demand curve equals:

Price elasticity remains constant along a straight-line demand curve.

Which of the following factors is associated with products with a highly price elastic demand?

Which statement about price elasticity of demand along a linear demand curve is true?

Elasticity has which special meaning for economists?

If a decrease in the price of football tickets increases the total revenue of the athletic department,this is evidence that demand 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 price elasticity of demand coefficient for a good will be greater:

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