Question 1

A measure of the responsiveness of the demand for one good to the percentage change in the price of another good is

Accepted Answer

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

Question 2

Wheat is sold in world markets, usually priced in terms of bushels. In the market for wheat, the price elasticity of demand for wheat would be expressed as

Accepted Answer

A)  the number of bushels of wheat sold. 
B)  the number of whatever currency is used in purchasing the wheat. 
C)  the number of dollars spent on wheat. 
D)  a unitless number. 
A)  the number of bushels of wheat sold. 
B)  the number of whatever currency is used in purchasing the wheat. 
C)  the number of dollars spent on wheat. 
D)  a unitless number.

Question 3

Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

Accepted Answer

Time is an important determinant in the

Question 4

When quantity supplied is not very responsive to a change in price, supply is

Accepted Answer

A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  income sensitive. 
A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  income sensitive.

Question 5

For which of the following would the absolute price elasticity of demand be greatest?

Accepted Answer

A)  Salt 
B)  Tickets to the Super Bowl 
C)  Pepsi Cola 
D)  Gasoline 
A)  Salt 
B)  Tickets to the Super Bowl 
C)  Pepsi Cola 
D)  Gasoline

Question 6

Inelastic demand implies

Accepted Answer

A)  that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B)  that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C)  that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D)  that a one percent decrease or increase in price induces no change in total revenue. 
A)  that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B)  that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C)  that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D)  that a one percent decrease or increase in price induces no change in total revenue.

Question 7

A vertical supply curve may be described as being

Accepted Answer

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

Question 8

We say that a good has elastic demand whenever the absolute value of the price elasticity of demand is greater than 1. A 1 percent change in price therefore causes

Accepted Answer

A)  exactly a 1 percent change in the quantity demanded. 
B)  a change of less than 1 percent in the quantity demanded. 
C)  a greater than 1 percent change in quantity demanded. 
D)  a change that cannot be determined based on 1 percent. 
A)  exactly a 1 percent change in the quantity demanded. 
B)  a change of less than 1 percent in the quantity demanded. 
C)  a greater than 1 percent change in quantity demanded. 
D)  a change that cannot be determined based on 1 percent.

Question 9

-In the above figure, along which range would total revenue rise by raising prices?

Accepted Answer

A)  Between point a and point b 
B)  Between point c and point d 
C)  Between point d and point e 
D)  Above point a 
A)  Between point a and point b 
B)  Between point c and point d 
C)  Between point d and point e 
D)  Above point a

Question 10

Suppose the quantity demanded of ice cream cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25. In this situation, the elasticity of demand, calculated using the average method, is

Accepted Answer

A)  3. 
B)  1. 
C)  0.33. 
D)  1.33. 
A)  3. 
B)  1. 
C)  0.33. 
D)  1.33.

Question 11

The cross price elasticity of demand is defined as

Accepted Answer

A)  the percentage change in the supply for one good (a shift in the supply curve) divided by the percentage change in price of a related good. 
B)  the percentage change in demand for two different commodities. 
C)  the percentage change in the demand for one good (a shift in the demand curve) divided by the percentage change in price of a related good. 
D)  the percentage change in price for two different commodities. 
A)  the percentage change in the supply for one good (a shift in the supply curve) divided by the percentage change in price of a related good. 
B)  the percentage change in demand for two different commodities. 
C)  the percentage change in the demand for one good (a shift in the demand curve) divided by the percentage change in price of a related good. 
D)  the percentage change in price for two different commodities.

Question 12

Income elasticity of demand reflects

Accepted Answer

A)  the change in total quantity demanded divided by the total change in income. 
B)  the responsiveness of the quantity demanded to changes in income, adjusting its relative price so real income does not change. 
C)  the responsiveness of income of producers to a change in quantity sold of the good. 
D)  the responsiveness of demand to changes in income. 
A)  the change in total quantity demanded divided by the total change in income. 
B)  the responsiveness of the quantity demanded to changes in income, adjusting its relative price so real income does not change. 
C)  the responsiveness of income of producers to a change in quantity sold of the good. 
D)  the responsiveness of demand to changes in income.

Question 13

-Use the above table. Based on the information in the table, artisan bread is a(n)

Accepted Answer

A)  normal good. 
B)  necessary good. 
C)  inferior good. 
D)  negative good. 
A)  normal good. 
B)  necessary good. 
C)  inferior good. 
D)  negative good.

Question 14

-In the above figure, along which range would total revenue rise by lowering prices?

Accepted Answer

A)  Between point a and point b 
B)  Between point c and point d 
C)  Between point d and point e 
D)  Below point e 
A)  Between point a and point b 
B)  Between point c and point d 
C)  Between point d and point e 
D)  Below point e

Question 15

When demand is elastic,

Accepted Answer

A)  a proportionately small change in price leads to a proportionately large change in quantity supplied. 
B)  a proportionately small change in price leads to a proportionately small change in quantity supplied. 
C)  a proportionately small change in price leads to a proportionately large change in quantity demanded. 
D)  a proportionately small change in price leads to a proportionately small change in quantity demanded. 
A)  a proportionately small change in price leads to a proportionately large change in quantity supplied. 
B)  a proportionately small change in price leads to a proportionately small change in quantity supplied. 
C)  a proportionately small change in price leads to a proportionately large change in quantity demanded. 
D)  a proportionately small change in price leads to a proportionately small change in quantity demanded.

Question 16

-In the above table, the cross price elasticity of demand (using averages) for Z with good X, when PX increases from $12 to $15, is approximately equal to

Accepted Answer

A)  +1.03 
B)  +2.26. 
C)  +0.44. 
D)  -0.44. 
A)  +1.03 
B)  +2.26. 
C)  +0.44. 
D)  -0.44.

Question 17

Explain the three possible ranges for price elasticity of demand.

Accepted Answer

If the percentage change in quantity dem

Question 18

If the demand curve for a product is horizontal, then

Accepted Answer

A)  the demand for the product is perfectly inelastic. 
B)  the demand for the product is perfectly elastic. 
C)  only a certain amount of the product will be consumed regardless of price. 
D)  the price elasticity of the product approaches zero. 
A)  the demand for the product is perfectly inelastic. 
B)  the demand for the product is perfectly elastic. 
C)  only a certain amount of the product will be consumed regardless of price. 
D)  the price elasticity of the product approaches zero.

Question 19

-In the above figure, over the price range P1P2, demand is

Accepted Answer

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

Question 20

If your income rises by 25 percent and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)

Accepted Answer

A)  substitute. 
B)  normal good. 
C)  complement. 
D)  inferior good. 
A)  substitute. 
B)  normal good. 
C)  complement. 
D)  inferior good.

Exam 19: Demand and Supply Elasticity

A measure of the responsiveness of the demand for one good to the percentage change in the price of another good is

Wheat is sold in world markets, usually priced in terms of bushels. In the market for wheat, the price elasticity of demand for wheat would be expressed as

Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

When quantity supplied is not very responsive to a change in price, supply is

For which of the following would the absolute price elasticity of demand be greatest?

Inelastic demand implies

A vertical supply curve may be described as being

We say that a good has elastic demand whenever the absolute value of the price elasticity of demand is greater than 1. A 1 percent change in price therefore causes

-In the above figure, along which range would total revenue rise by raising prices?

Suppose the quantity demanded of ice cream cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25. In this situation, the elasticity of demand, calculated using the average method, is

The cross price elasticity of demand is defined as

Income elasticity of demand reflects

-Use the above table. Based on the information in the table, artisan bread is a(n)

-In the above figure, along which range would total revenue rise by lowering prices?

When demand is elastic,

-In the above table, the cross price elasticity of demand (using averages) for Z with good X, when PX increases from $12 to $15, is approximately equal to

Explain the three possible ranges for price elasticity of demand.

If the demand curve for a product is horizontal, then

-In the above figure, over the price range P1P2, demand is

If your income rises by 25 percent and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-In the above table, the cross price elasticity of demand (using averages) for Z with good X, when P_X increases from $12 to $15, is approximately equal to

-In the above figure, over the price range P₁P₂, demand is