Question 1

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded,the price elasticity of demand is:

Accepted Answer

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

Question 2

Which of the following statements is not true?

Accepted Answer

A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low. 
E)  Elasticities increase as the price of the good increases. 
A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low. 
E)  Elasticities increase as the price of the good increases.

Question 3

Leo's Bakery reduces the price of wheat bread from $3 to $1 and finds that quantity demanded increases from 100 to 122 loaves.Leo calculates that his price elasticity of demand for wheat bread is:

Accepted Answer

A)  0. 
B)  0.2. 
C)  1.0. 
D)  1.5. 
E)  2.0 
A)  0. 
B)  0.2. 
C)  1.0. 
D)  1.5. 
E)  2.0

Question 4

Exhibit 5-7 Demand curve for concert tickets
  
-According to Exhibit 5-7,the demand for concert tickets is:

Accepted Answer

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

Question 5

If a 10 percent cut in price causes a 15 percent increase in sales,then:

Accepted Answer

A)  total revenue will decrease. 
B)  demand is price inelastic in this range. 
C)  demand is price elastic in this range. 
D)  demand is unit elastic in this range. 
E)  total revenue will remain the same. 
A)  total revenue will decrease. 
B)  demand is price inelastic in this range. 
C)  demand is price elastic in this range. 
D)  demand is unit elastic in this range. 
E)  total revenue will remain the same.

Question 6

Looking at the relationship between elasticity and total revenue,we can see that ____.

Accepted Answer

A)  b and c 
B)  when demand is unit elastic, small price changes don't change total revenue 
C)  when a good is price inelastic, revenue increases when prices increase 
D)  when a good is price elastic, revenue increases when prices increase 
E)  total revenue is maximized when the elasticity has stopped changing 
A)  b and c 
B)  when demand is unit elastic, small price changes don't change total revenue 
C)  when a good is price inelastic, revenue increases when prices increase 
D)  when a good is price elastic, revenue increases when prices increase 
E)  total revenue is maximized when the elasticity has stopped changing

Question 7

If the price elasticity of demand is computed for two products,and product A measures .79,and product B measures 1.6,then:

Accepted Answer

A)  product A is more price elastic than product B. 
B)  product B is more price elastic than product A. 
C)  consumers are more sensitive to price changes in product A than in product B. 
D)  product B is more price inelastic than product A. 
E)  products A and B must be substitutes. 
A)  product A is more price elastic than product B. 
B)  product B is more price elastic than product A. 
C)  consumers are more sensitive to price changes in product A than in product B. 
D)  product B is more price inelastic than product A. 
E)  products A and B must be substitutes.

Question 8

Another word for elasticity is:

Accepted Answer

A)  responsiveness. 
B)  happiness. 
C)  bonus 
D)  profit. 
E)  surplus. 
A)  responsiveness. 
B)  happiness. 
C)  bonus 
D)  profit. 
E)  surplus.

Question 9

Tara buys four music cassettes when the price is $10 and two cassettes when the price is $14.Her price elasticity of demand is:

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4. 
A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4.

Question 10

Suppose you are the manager of a local water company,and you are instructed to get consumers to reduce their water consumption by 10 percent.If the price elasticity of demand for water is 0.25,by how much would you have to raise the price of water?

Accepted Answer

A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent 
A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent

Question 11

The percentage change in the quantity demanded of film divided by the percentage change in the price of cameras indicates:

Accepted Answer

A)  the price elasticity of demand for film. 
B)  the price elasticity of demand for cameras. 
C)  the price elasticity of supply for film. 
D)  the price elasticity of supply for cameras. 
E)  nothing, because the two goods fall into the broadly defined category of photographic equipment. 
A)  the price elasticity of demand for film. 
B)  the price elasticity of demand for cameras. 
C)  the price elasticity of supply for film. 
D)  the price elasticity of supply for cameras. 
E)  nothing, because the two goods fall into the broadly defined category of photographic equipment.

Question 12

If New York City expects that an increase in bus fares will raise mass transit revenues,it must think that the demand for bus travel is:

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  perfectly inelastic. 
E)  10. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  perfectly inelastic. 
E)  10.

Question 13

If the price elasticity of demand for a good is elastic,then consumers are relatively unresponsive with respect to the quantity purchased when the price changes.

Accepted Answer

A) True 
 B)False

Question 14

A lower price elasticity of demand coefficient occurs when:

Accepted Answer

A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined. 
A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined.

Question 15

Which of the following describes a situation in which demand must be elastic?

Accepted Answer

A)  Total revenue increases by 15 percent when the price of corn dogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corn dogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corn dogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corn dogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corn dogs rises by $15. 
A)  Total revenue increases by 15 percent when the price of corn dogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corn dogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corn dogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corn dogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corn dogs rises by $15.

Question 16

An increase in total revenue results occurs from which of the following?

Accepted Answer

A)  Price decreases when demand is inelastic. 
B)  Price increases when demand is elastic. 
C)  Price decreases when demand is elastic. 
D)  Price increases when demand is unitary elastic. 
A)  Price decreases when demand is inelastic. 
B)  Price increases when demand is elastic. 
C)  Price decreases when demand is elastic. 
D)  Price increases when demand is unitary elastic.

Question 17

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

Accepted Answer

A) True 
 B)False

Exam 5: Price Elasticity of Demand

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded,the price elasticity of demand is:

Which of the following statements is not true?

Leo's Bakery reduces the price of wheat bread from $3 to $1 and finds that quantity demanded increases from 100 to 122 loaves.Leo calculates that his price elasticity of demand for wheat bread is:

Exhibit 5-7 Demand curve for concert tickets -According to Exhibit 5-7,the demand for concert tickets is:

If a 10 percent cut in price causes a 15 percent increase in sales,then:

Looking at the relationship between elasticity and total revenue,we can see that ____.

If the price elasticity of demand is computed for two products,and product A measures .79,and product B measures 1.6,then:

Another word for elasticity is:

Tara buys four music cassettes when the price is $10 and two cassettes when the price is $14.Her price elasticity of demand is:

Suppose you are the manager of a local water company,and you are instructed to get consumers to reduce their water consumption by 10 percent.If the price elasticity of demand for water is 0.25,by how much would you have to raise the price of water?

The percentage change in the quantity demanded of film divided by the percentage change in the price of cameras indicates:

If New York City expects that an increase in bus fares will raise mass transit revenues,it must think that the demand for bus travel is:

If the price elasticity of demand for a good is elastic,then consumers are relatively unresponsive with respect to the quantity purchased when the price changes.

A lower price elasticity of demand coefficient occurs when:

Which of the following describes a situation in which demand must be elastic?

An increase in total revenue results occurs from which of the following?

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

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