Question 1

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

Accepted Answer

A)  It is inelastic at high prices and elastic at low prices. 
B)  It is unit-elastic throughout the demand curve. 
C)  It is elastic at high prices and inelastic at low prices. 
D)  It is perfectly elastic at very high prices and perfectly inelastic at very low prices. 
A)  It is inelastic at high prices and elastic at low prices. 
B)  It is unit-elastic throughout the demand curve. 
C)  It is elastic at high prices and inelastic at low prices. 
D)  It is perfectly elastic at very high prices and perfectly inelastic at very low prices. C

Question 2

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is

Accepted Answer

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

Question 3

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Accepted Answer

Price elasticity of demand measures the responsiveness of the quantity of a product demanded to a change in the price of the product.Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price.Demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price.Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price.

Question 4

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Accepted Answer

Price elasticity of supply refers to the

Question 5

Consider the following types of demand curves: 
a.a vertical demand curve
b.a horizontal demand curve
c.a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Accepted Answer

A)  a only 
B)  b only 
C)  a and b only 
D)  a, b, and c 
A)  a only 
B)  b only 
C)  a and b only 
D)  a, b, and c

Question 6

Figure 6-1  
-Refer to Figure 6-1.A perfectly elastic demand curve is shown in

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D. 
A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D.

Question 7

The price elasticity of an upward-sloping supply curve is always

Accepted Answer

A)  positive. 
B)  negative. 
C)  greater than one. 
D)  impossible to determine. 
A)  positive. 
B)  negative. 
C)  greater than one. 
D)  impossible to determine.

Question 8

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75.Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour.Based on this information,calculate the percentage change in the employment of low skilled workers.Use the midpoint formula.

Accepted Answer

percent ch

Question 9

According to a study of the U.S.demand for alcoholic beverages,the price elasticity of demand for beer is -0.23.Which of the following could explain why the price elasticity of demand for beer is low?

Accepted Answer

A)  Beer is an inferior alcoholic beverage. 
B)  More and more people are switching to wine and cocktails rather than beer. 
C)  The price of beer is relatively low and for many people it is a habit forming product. 
D)  There are only a few major suppliers of beer. 
A)  Beer is an inferior alcoholic beverage. 
B)  More and more people are switching to wine and cocktails rather than beer. 
C)  The price of beer is relatively low and for many people it is a habit forming product. 
D)  There are only a few major suppliers of beer.

Question 10

When demand is elastic,a fall in price causes total revenue to rise because

Accepted Answer

A)  when price falls, quantity sold increases so total revenue automatically rises. 
B)  the increase in quantity sold is large enough to offset the lower price. 
C)  the percentage increase in quantity demanded is less than the percentage fall in price. 
D)  the demand curve shifts. 
A)  when price falls, quantity sold increases so total revenue automatically rises. 
B)  the increase in quantity sold is large enough to offset the lower price. 
C)  the percentage increase in quantity demanded is less than the percentage fall in price. 
D)  the demand curve shifts.

Question 11

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Accepted Answer

A)  40 percent 
B)  25 percent 
C)  2.5 percent 
D)  0.4 percent 
A)  40 percent 
B)  25 percent 
C)  2.5 percent 
D)  0.4 percent

Question 12

Figure 6-1  
-Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D. 
A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D.

Question 13

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

Accepted Answer

A)  buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B)  buyers of steel are less sensitive to a price change if they have more time to adjust to the price change 
C)  sales revenue in the building industry will fall sharply. 
D)  profits will fall by a greater amount in the long run than in the short run. 
A)  buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B)  buyers of steel are less sensitive to a price change if they have more time to adjust to the price change 
C)  sales revenue in the building industry will fall sharply. 
D)  profits will fall by a greater amount in the long run than in the short run.

Question 14

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Accepted Answer

A)  the decrease in quantity sold is proportionately larger than the resulting change in price. 
B)  the resulting increase in price is proportionately greater than decrease in quantity sold. 
C)  the demand curve for wheat must be vertical. 
D)  the supply curve for wheat must be vertical. 
A)  the decrease in quantity sold is proportionately larger than the resulting change in price. 
B)  the resulting increase in price is proportionately greater than decrease in quantity sold. 
C)  the demand curve for wheat must be vertical. 
D)  the supply curve for wheat must be vertical.

Question 15

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Accepted Answer

1.Availability of close substitutes: If

Question 16

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Accepted Answer

A)  -0.66 
B)  0.5 
C)  1.5 
D)  2 
A)  -0.66 
B)  0.5 
C)  1.5 
D)  2

Question 17

Facing stiff competition,Hendrix College,a small liberal arts institution in Conway,Ark.,decided two years ago to bolster its academic offerings,promising students at least three hands-on experiences outside the classroom,including research,internships and service projects.Although it raised tuition and fees by 29 percent,enrollment in the freshman class rose by 37 percent. Source: Jonathan D.Glater and Alan Finder,"In New Twist on Tuition Game,Popularity Rises With the Price," New York Times,December 12,2006
Based on the information above,the demand for Hendrix College education is

Accepted Answer

A)  unit-elastic. 
B)  perfectly elastic. 
C)  relatively inelastic. 
D)  More information is needed to answer the question. 
A)  unit-elastic. 
B)  perfectly elastic. 
C)  relatively inelastic. 
D)  More information is needed to answer the question.

Question 18

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

Accepted Answer

A)  The elasticity coefficient is likely to be very high and supply is inelastic. 
B)  The elasticity coefficient is likely to be close to zero and supply is perfectly elastic. 
C)  The elasticity coefficient is likely to be low and supply is highly inelastic. 
D)  The elasticity coefficient is likely to be low and supply is highly elastic. 
A)  The elasticity coefficient is likely to be very high and supply is inelastic. 
B)  The elasticity coefficient is likely to be close to zero and supply is perfectly elastic. 
C)  The elasticity coefficient is likely to be low and supply is highly inelastic. 
D)  The elasticity coefficient is likely to be low and supply is highly elastic.

Question 19

Explain the relationship between price elasticity of demand and total revenue.

Accepted Answer

If demand is elastic,the an increase in

Question 20

Price elasticity of demand measures

Accepted Answer

A)  how responsive suppliers are to price changes. 
B)  how responsive sales are to changes in the price of a related good. 
C)  how responsive quantity demanded is to a change in price. 
D)  how responsive sales are to a change in buyers' incomes. 
A)  how responsive suppliers are to price changes. 
B)  how responsive sales are to changes in the price of a related good. 
C)  how responsive quantity demanded is to a change in price. 
D)  how responsive sales are to a change in buyers' incomes.

Exam 6: Elasticity: The Responsiveness of Demand and Supply

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Consider the following types of demand curves: a.a vertical demand curve b.a horizontal demand curve c.a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Figure 6-1 -Refer to Figure 6-1.A perfectly elastic demand curve is shown in

The price elasticity of an upward-sloping supply curve is always

According to a study of the U.S.demand for alcoholic beverages,the price elasticity of demand for beer is -0.23.Which of the following could explain why the price elasticity of demand for beer is low?

When demand is elastic,a fall in price causes total revenue to rise because

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Figure 6-1 -Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

Explain the relationship between price elasticity of demand and total revenue.

Price elasticity of demand measures

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

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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