Question 1

Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change. We would conclude that

Accepted Answer

A)  the two goods are substitutes, but the cross elasticity of demand is not large. 
B)  the two goods are complements, but the cross elasticity of demand is not large. 
C)  the two goods are perfect substitutes. 
D)  the two goods are not related. 
A)  the two goods are substitutes, but the cross elasticity of demand is not large. 
B)  the two goods are complements, but the cross elasticity of demand is not large. 
C)  the two goods are perfect substitutes. 
D)  the two goods are not related.

Question 2

Suppose that the value of the long-run absolute elasticity of demand for a good is 1.21. Then, we know the short-run absolute price elasticity of demand will be

Accepted Answer

A)  inelastic. 
B)  greater than 1.21. 
C)  elastic. 
D)  less than 1.21. 
A)  inelastic. 
B)  greater than 1.21. 
C)  elastic. 
D)  less than 1.21.

Question 3

Income elasticity of demand is defined as

Accepted Answer

A)  the change in income divided by the change in quantity. 
B)  the change in price divided by the change in income. 
C)  the percentage change in demand divided by the percentage change in income. 
D)  the change in income multiplied by the change in quantity. 
A)  the change in income divided by the change in quantity. 
B)  the change in price divided by the change in income. 
C)  the percentage change in demand divided by the percentage change in income. 
D)  the change in income multiplied by the change in quantity.

Question 4

The local baseball stadium's concession stands previously sold hot dogs for 80 cents apiece. At that price, when a baseball fan went to watch a baseball game, he bought 2 hotdogs. But now that the stadium has a "dime-a-dog night," he has purchased 6 hot dogs. What is the approximate value of this individual's absolute price elasticity of demand for hot dogs?

Accepted Answer

A)  0.64 
B)  0.80 
C)  1.00 
D)  1.56 
A)  0.64 
B)  0.80 
C)  1.00 
D)  1.56

Question 5

The price elasticity of demand measures

Accepted Answer

A)  changes in demand. 
B)  how responsive producers are to a change in demand. 
C)  how responsive consumers are to a change in price. 
D)  how responsive consumers are to a change in income. 
A)  changes in demand. 
B)  how responsive producers are to a change in demand. 
C)  how responsive consumers are to a change in price. 
D)  how responsive consumers are to a change in income.

Question 6

If a 10 percent increase in price causes a 5 percent increase in quantity supplied, then supply is

Accepted Answer

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

Question 7

Suppose that the absolute price elasticity for cookies equals 0.9. We could then say that the demand for cookies is

Accepted Answer

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

Question 8

An elastic response in the quantity of a good demanded would be caused by

Accepted Answer

A)  the availability of many substitutes. 
B)  a lack of substitutes. 
C)  a lack of sensitivity to the good's price. 
D)  the good representing a small portion of a person's budget. 
A)  the availability of many substitutes. 
B)  a lack of substitutes. 
C)  a lack of sensitivity to the good's price. 
D)  the good representing a small portion of a person's budget.

Question 9

-Use the above figure. Which graph depicts a normal good?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 10

When quantity supplied is 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 11

Which of the following would most likely exhibit the highest price elasticity of demand?

Accepted Answer

A)  Gasoline 
B)  One particular brand of toothpaste 
C)  Motor oil 
D)  Salt 
A)  Gasoline 
B)  One particular brand of toothpaste 
C)  Motor oil 
D)  Salt

Question 12

When two goods are unrelated,

Accepted Answer

A)  the demands for both goods will be inelastic. 
B)  cross price elasticity of demand will be 0. 
C)  cross price elasticity of demand will be negative. 
D)  cross price elasticity of demand will be positive. 
A)  the demands for both goods will be inelastic. 
B)  cross price elasticity of demand will be 0. 
C)  cross price elasticity of demand will be negative. 
D)  cross price elasticity of demand will be positive.

Question 13

The income elasticity of demand

Accepted Answer

A)  is positive only. 
B)  is negative only. 
C)  must lie between -1 and +1. 
D)  can be positive, negative, or zero. 
A)  is positive only. 
B)  is negative only. 
C)  must lie between -1 and +1. 
D)  can be positive, negative, or zero.

Question 14

If demand is unit elastic, then

Accepted Answer

A)  a ten percent increase in price leads to a one percent decrease in quantity demanded. 
B)  the percentage change in quantity demanded equals the percentage change in price. 
C)  a two percent increase in price leads to a two percent decrease in quantity demanded. 
D)  an increase in price of any amount leads to quantity demanded falling to zero. 
A)  a ten percent increase in price leads to a one percent decrease in quantity demanded. 
B)  the percentage change in quantity demanded equals the percentage change in price. 
C)  a two percent increase in price leads to a two percent decrease in quantity demanded. 
D)  an increase in price of any amount leads to quantity demanded falling to zero.

Question 15

We generally expect the price elasticity of supply to be

Accepted Answer

A)  zero. 
B)  negative. 
C)  positive. 
D)  between -1 and +1. 
A)  zero. 
B)  negative. 
C)  positive. 
D)  between -1 and +1.

Question 16

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

A)  the availability of potential substitutes 
B)  the share of the budget spent on the item 
C)  the time the consumer has to adjust to the price change 
D)  the cost to produce the product 
A)  the availability of potential substitutes 
B)  the share of the budget spent on the item 
C)  the time the consumer has to adjust to the price change 
D)  the cost to produce the product

Question 17

If a good has an absolute price elasticity of 1, the demand for the good is

Accepted Answer

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

Question 18

Other things being equal, demand is less elastic

Accepted Answer

A)  the more expensive the good is. 
B)  the smaller the percentage of a total budget that a family spends on a good. 
C)  the longer is the time period for adjustment. 
D)  the more substitutes a good has. 
A)  the more expensive the good is. 
B)  the smaller the percentage of a total budget that a family spends on a good. 
C)  the longer is the time period for adjustment. 
D)  the more substitutes a good has.

Question 19

-In the above figure, over the price range P5P6, demand is

Accepted Answer

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

Question 20

If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause

Accepted Answer

A)  the quantity demanded to decrease by 2 percent. 
B)  the quantity demanded to decrease by 20 percent. 
C)  the quantity demanded to decrease by 5 percent. 
D)  the quantity demanded to decrease by 0.2 percent. 
A)  the quantity demanded to decrease by 2 percent. 
B)  the quantity demanded to decrease by 20 percent. 
C)  the quantity demanded to decrease by 5 percent. 
D)  the quantity demanded to decrease by 0.2 percent.

Exam 19: Demand and Supply Elasticity

Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change. We would conclude that

Suppose that the value of the long-run absolute elasticity of demand for a good is 1.21. Then, we know the short-run absolute price elasticity of demand will be

Income elasticity of demand is defined as

The price elasticity of demand measures

If a 10 percent increase in price causes a 5 percent increase in quantity supplied, then supply is

Suppose that the absolute price elasticity for cookies equals 0.9. We could then say that the demand for cookies is

An elastic response in the quantity of a good demanded would be caused by

-Use the above figure. Which graph depicts a normal good?

When quantity supplied is very responsive to a change in price, supply is

Which of the following would most likely exhibit the highest price elasticity of demand?

When two goods are unrelated,

The income elasticity of demand

If demand is unit elastic, then

We generally expect the price elasticity of supply to be

Which of the following is NOT a determinant of the price elasticity of demand?

If a good has an absolute price elasticity of 1, the demand for the good is

Other things being equal, demand is less elastic

-In the above figure, over the price range P5P6, demand is

If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause

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 figure, over the price range P₅P₆, demand is