Question 1

If the price of a good goes up by 5 percent and, in response, the quantity demanded falls by 15 percent, the price elasticity of demand will be:

Accepted Answer

A)  .05. 
B)  3. 
C)  0.3333. 
D)  0.15.

Question 2

If average movie attendance is 250 million when prices are $9 a ticket and 200 million when prices are $11 a ticket, the elasticity of demand for movie tickets is about:

Accepted Answer

A)  0.0. 
B)  0.9. 
C)  1.1. 
D)  1.8.

Question 3

Refer to the following table to answer the question. Demand is inelastic between: $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity Demanded } \
\hline \$ 6.00 & 18 \
\hline \$ 8.00 & 14 \
\hline \$ 10.00 & 10 \
\hline \$ 12.00 & 6 \
\hline \$ 14.00 & 2 \
\hline
\end{array}$$

Accepted Answer

A)  $6 and $8. 
B)  $8 and $10. 
C)  $10 and $12. 
D)  $12 and $14.

Question 4

Refer to the graph shown. When price declines by 11 percent, quantity supplied falls by 8 percent. Which curve best demonstrates the elasticity in this example?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  None of the answers is correct.

Question 5

If the elasticity of demand for restaurant meals is 2.27, the demand for restaurant meals is:

Accepted Answer

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

Question 6

If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about:

Accepted Answer

A)  0.0. 
B)  0.4. 
C)  0.6. 
D)  2.5.

Question 7

If an economist observed that higher hot dog prices lead to a decrease in the demand for chili, she most likely would conclude that:

Accepted Answer

A)  chili and hot dogs are complements. 
B)  chili and hot dogs are substitutes. 
C)  chili and hot dogs are both inferior goods. 
D)  chili and hot dogs are both normal goods.

Question 8

In general, the greater the elasticity, the:

Accepted Answer

A)  smaller the responsiveness of price to changes in quantity. 
B)  smaller the responsiveness of quantity to changes in price. 
C)  larger the responsiveness of price to changes in quantity. 
D)  larger the responsiveness of quantity to changes in price.

Question 9

Price elasticity of demand is the:

Accepted Answer

A)  change in the quantity demanded of a good divided by the change in the price of that good. 
B)  change in the price of a good divided by the change in the quantity demanded of that good. 
C)  percentage change in price of that good divided by the percentage change in the quantity demanded of that good. 
D)  percentage change in quantity demanded of a good divided by the percentage change in the price of that good.

Question 10

The demand for a good is inelastic. Which of the following would be the most likely explanation for this?

Accepted Answer

A)  The good is narrowly defined. 
B)  The good is broadly defined. 
C)  The good costs a large portion of one's total income. 
D)  The time interval considered is long.

Question 11

Refer to the graph shown. Demand is inelastic on line segment:

Accepted Answer

A)  AB. 
B)  BC. 
C)  CD. 
D)  The demand is not inelastic on any of these line segments.

Question 12

If the demand for agricultural output is highly inelastic, an improvement in the technology used in the agricultural industry most likely will cause a:

Accepted Answer

A)  small drop in the price of agricultural output combined with a small increase in quantity. 
B)  small drop in the price of agricultural output combined with a large increase in quantity. 
C)  large drop in the price of agricultural output combined with a small increase in quantity. 
D)  large drop in the price of agricultural output combined with a large decrease in quantity.

Question 13

Refer to the following graph.  Elasticity is greatest at point:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  It is the same everywhere along this supply curve.

Question 14

The price elasticity of demand for insulin by diabetic patients is much smaller than the price elasticity of demand for leather shoes. This is an example of how the price elasticity of demand:

Accepted Answer

A)  falls the less specifically the good is defined. 
B)  rises the less specifically the good is defined. 
C)  falls the more a good is a necessity. 
D)  rises the more a good is a necessity.

Question 15

Which of the following most likely correctly orders goods from most to least demand elastic?

Accepted Answer

A)  Cars, motor transportation, transportation 
B)  Transportation, bicycles, non-motor transportation 
C)  Brand-name Advil, pain-relieving medicine, aspirin 
D)  Pain-relieving medicine, brand-name Advil, aspirin

Question 16

An economist estimates that on average, for every 1 percent increase in income, the quantity of European cars demanded increases by 1.93 percent. From this information one can conclude that European cars are:

Accepted Answer

A)  a luxury. 
B)  a necessity. 
C)  an inferior good. 
D)  a negative good.

Question 17

If supply is highly inelastic and demand shifts to the right:

Accepted Answer

A)  price probably will rise significantly; quantity hardly changes at all. 
B)  price will hardly change at all; quantity will rise significantly. 
C)  price will rise significantly as will quantity. 
D)  price and quantity will hardly change at all.

Question 18

If demand is highly elastic and supply shifts to the left:

Accepted Answer

A)  price will rise significantly; quantity hardly changes at all. 
B)  price will hardly change at all; quantity will decline significantly. 
C)  price will rise significantly and quantity will fall significantly. 
D)  price and quantity will hardly change at all.

Question 19

The president of a college has been told that when they raised their tuition by 15 percent the previous year, total revenue from tuition remained unchanged. Assuming the change in revenue is due to the change in tuition only, the president could conclude that demand for that college, over that tuition range, must be:

Accepted Answer

A)  greater than 1. 
B)  less than 1. 
C)  equal to 1. 
D)  equal to zero.

Question 20

For which of the following goods is the demand curve likely to be most inelastic?

Accepted Answer

A)  Hershey's Symphony chocolate bar 
B)  Chocolate bars with nuts 
C)  Candy 
D)  Chocolate bars

Exam 6: Describing Supply and Demand: Elasticities