Question 1

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Accepted Answer

A) demand is elastic and supply is inelastic. 
B) demand is inelastic and supply is elastic. 
C) both demand and supply are inelastic. 
D) both demand and supply are elastic. 
A) demand is elastic and supply is inelastic. 
B) demand is inelastic and supply is elastic. 
C) both demand and supply are inelastic. 
D) both demand and supply are elastic.

Question 2

Last year,Joan bought 50 pounds of hamburger when her household income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is

Accepted Answer

A) positive,so Joan considers hamburger to be an inferior good. 
B) negative,so Joan considers hamburger to be an inferior good. 
C) positive,so Joan considers hamburger to be a normal good and a necessity. 
D) negative,so Joan considers hamburger to be a normal good. 
A) positive,so Joan considers hamburger to be an inferior good. 
B) negative,so Joan considers hamburger to be an inferior good. 
C) positive,so Joan considers hamburger to be a normal good and a necessity. 
D) negative,so Joan considers hamburger to be a normal good.

Question 3

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal.He found that

Accepted Answer

A) the price elasticity for a particular brand of raisin bran was the same as the elasticity of demand for all family cereals. 
B) the price elasticity of demand for Post Raisin Bran is less than the price elasticity of demand for Kellogg's Raisin Bran. 
C) the price elasticity of all family breakfast cereals is greater than the price elasticity of demand for Post Raisin Bran or Kellogg's Raisin Bran. 
D) the price elasticity of demand for a particular brand of raisin bran was larger in absolute value than the elasticity for all family cereals. 
A) the price elasticity for a particular brand of raisin bran was the same as the elasticity of demand for all family cereals. 
B) the price elasticity of demand for Post Raisin Bran is less than the price elasticity of demand for Kellogg's Raisin Bran. 
C) the price elasticity of all family breakfast cereals is greater than the price elasticity of demand for Post Raisin Bran or Kellogg's Raisin Bran. 
D) the price elasticity of demand for a particular brand of raisin bran was larger in absolute value than the elasticity for all family cereals.

Question 4

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

Accepted Answer

A) relatively,but not perfectly,elastic. 
B) unit-elastic. 
C) completely inelastic. 
D) relatively,but not perfectly,inelastic. 
A) relatively,but not perfectly,elastic. 
B) unit-elastic. 
C) completely inelastic. 
D) relatively,but not perfectly,inelastic.

Question 5

The cross-price elasticity of demand measures the

Accepted Answer

A) absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. 
B) percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. 
C) percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D) percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location. 
A) absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. 
B) percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. 
C) percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D) percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location.

Question 6

A perfectly elastic demand curve is

Accepted Answer

A) vertical. 
B) horizontal. 
C) curvilinear. 
D) upward sloping. 
A) vertical. 
B) horizontal. 
C) curvilinear. 
D) upward sloping.

Question 7

Shifts in the supply of oil have caused large changes in price since the 1970s because

Accepted Answer

A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time. 
B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time. 
C) both the supply of oil and the demand for oil are inelastic over short periods of time. 
D) the supply of oil and the demand for oil are perfectly elastic over short periods of time. 
A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time. 
B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time. 
C) both the supply of oil and the demand for oil are inelastic over short periods of time. 
D) the supply of oil and the demand for oil are perfectly elastic over short periods of time.

Question 8

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product increases.Which of the following statements accurately predicts the resulting increase in price?

Accepted Answer

A) The more elastic the supply curve,the greater the price increase. 
B) The more elastic the supply curve,the smaller the price increase. 
C) The increase in price is not affected by the elasticity of the supply curve. 
D) There will be no increase in price if the supply curve is perfectly inelastic. 
A) The more elastic the supply curve,the greater the price increase. 
B) The more elastic the supply curve,the smaller the price increase. 
C) The increase in price is not affected by the elasticity of the supply curve. 
D) There will be no increase in price if the supply curve is perfectly inelastic.

Question 9

You are the manager of a theater.At present the theater charges the same admission price of $8 to all customers,regardless of age.You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults.You tell your supervisor that your proposal is likely to increase revenues.What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.

Accepted Answer

You believe that the price elasticity of

Question 10

Table 6-1
  
-Refer to Table 6-1.Suppose you own a bookstore.You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35.You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day.Compute the price elasticity of demand using the mid-point formula and these data.Select the correct implication from your work.

Accepted Answer

A) The demand for the John Grisham book is inelastic.Revenue will fall if the price is lowered. 
B) The demand for the John Grisham book is elastic.Revenue will rise if the price is lowered. 
C) The demand for the John Grisham book is inelastic.Revenue will rise if the price is lowered. 
D) The demand for the John Grisham book is elastic.Revenue will fall if the price is lowered. 
A) The demand for the John Grisham book is inelastic.Revenue will fall if the price is lowered. 
B) The demand for the John Grisham book is elastic.Revenue will rise if the price is lowered. 
C) The demand for the John Grisham book is inelastic.Revenue will rise if the price is lowered. 
D) The demand for the John Grisham book is elastic.Revenue will fall if the price is lowered.

Question 11

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a.Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair coloring product.
b.A new Ford Fusion or a tank of gas for your current car.
c.A Seiko watch or watches in general.

Accepted Answer

a.The demand for the hair product is mor

Question 12

Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic,and that the demand curve for cantaloupes is linear and downward sloping.If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

Accepted Answer

A) The demand for cantaloupes at $2.00 must be inelastic. 
B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C) The demand for cantaloupes at $2.00 must be elastic. 
D) The demand for cantaloupes at $2.00 must be unit-elastic. 
A) The demand for cantaloupes at $2.00 must be inelastic. 
B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C) The demand for cantaloupes at $2.00 must be elastic. 
D) The demand for cantaloupes at $2.00 must be unit-elastic.

Question 13

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

Accepted Answer

A) horizontal. 
B) downward sloping. 
C) curvilinear. 
D) vertical. 
A) horizontal. 
B) downward sloping. 
C) curvilinear. 
D) vertical.

Question 14

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0,and the good is ________ good.

Accepted Answer

A) greater; an inferior 
B) less; a normal 
C) less; an inferior 
D) greater; a normal 
A) greater; an inferior 
B) less; a normal 
C) less; an inferior 
D) greater; a normal

Question 15

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Accepted Answer

A) 1.5 percent. 
B) 15 percent. 
C) approximately 25 percent. 
D) approximately 5 percent. 
A) 1.5 percent. 
B) 15 percent. 
C) approximately 25 percent. 
D) approximately 5 percent.

Question 16

Table 6-2
  
-Refer to Table 6-2.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

Accepted Answer

A) The demand for Coca-Cola is inelastic. 
B) The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C) The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D) There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks." 
A) The demand for Coca-Cola is inelastic. 
B) The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C) The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D) There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks."

Question 17

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore,

Accepted Answer

A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value). 
A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 18

If the price elasticity of demand is unit-elastic,a 10 percent increase in price will result in a 10 percent increase in revenue.

Accepted Answer

A) True 
 B)False

Question 19

The income elasticity of demand measures

Accepted Answer

A) the responsiveness of quantity demanded to changes in income. 
B) how a consumer's purchasing power is affected by a change in the price of a product. 
C) the percentage change in the price of a product divided by the percentage change in consumer income. 
D) the income effect of a change in price. 
A) the responsiveness of quantity demanded to changes in income. 
B) how a consumer's purchasing power is affected by a change in the price of a product. 
C) the percentage change in the price of a product divided by the percentage change in consumer income. 
D) the income effect of a change in price.

Question 20

Figure 6-5  
-Refer to Figure 6-5.The diagram shows two supply curves,SA and SB.As price rises from P0 to P1,which supply curve is more elastic?

Accepted Answer

A) SA 
B) SB 
C) They are equally inelastic. 
D) They are equally elastic. 
A) SA 
B) SB 
C) They are equally inelastic. 
D) They are equally elastic.

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Last year,Joan bought 50 pounds of hamburger when her household income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal.He found that

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

The cross-price elasticity of demand measures the

A perfectly elastic demand curve is

Shifts in the supply of oil have caused large changes in price since the 1970s because

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product increases.Which of the following statements accurately predicts the resulting increase in price?

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is than 0,and the good is good.

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Table 6-2 -Refer to Table 6-2.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore,

If the price elasticity of demand is unit-elastic,a 10 percent increase in price will result in a 10 percent increase in revenue.

The income elasticity of demand measures

Figure 6-5 -Refer to Figure 6-5.The diagram shows two supply curves,S_A and S_B.As price rises from P₀ to P₁,which supply curve is more elastic?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Last year,Joan bought 50 pounds of hamburger when her household income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.Holding everything else constant,Joan's income elasticity of demand for hamburger is

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal.He found that

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

The cross-price elasticity of demand measures the

A perfectly elastic demand curve is

Shifts in the supply of oil have caused large changes in price since the 1970s because

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product increases.Which of the following statements accurately predicts the resulting increase in price?

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0,and the good is ________ good.

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Table 6-2 -Refer to Table 6-2.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore,

If the price elasticity of demand is unit-elastic,a 10 percent increase in price will result in a 10 percent increase in revenue.

The income elasticity of demand measures

Figure 6-5 -Refer to Figure 6-5.The diagram shows two supply curves,SA and SB.As price rises from P0 to P1,which supply curve is more elastic?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is than 0,and the good is good.

Figure 6-5 -Refer to Figure 6-5.The diagram shows two supply curves,S_A and S_B.As price rises from P₀ to P₁,which supply curve is more elastic?