Question 1

The producer of good X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for good X is 0.75. Your best advice to the producer would be to

Accepted Answer

A) increase the price of good X to raise total revenue. 
B) decrease the price of good X to raise total revenue. 
C) leave the price of good X unchanged since it will not influence total revenue. 
D) increase the price of good X to reduce total revenue.

Question 2

The price elasticity of demand tends to be higher for goods

Accepted Answer

A) for which the consumer spends a high percentage of his or her income. 
B) for which the consumer spends a low percentage of his or her income. 
C) that are in abundant supply. 
D) that are in scarce supply.

Question 3

Vernon spends the following percentages of his budget on the goods A, B, C, and D: 23 percent on good A, 11 percent on good B, 1 percent on good C, and 3 percent on good D. For which good is price elasticity of demand the highest, ceteris paribus?

Accepted Answer

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

Question 4

The quantity demanded of good A changes from 100 to 111 when the price of good A changes from $9 to $8. The cross elasticity of demand is

Accepted Answer

A) 1.20. 
B) -1.13. 
C) 2.20. 
D) -0.89. 
E) There is not enough information to answer the question.

Question 5

Exhibit 19-2
​
 
-Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X as shown by the shift of S1 to S2. What is an expression for the tax revenue raised?

Accepted Answer

A) $2.25 x Q2 
B) $1.25 x Q2 
C) $1.00 x Q2 
D) ($1.00 x Q2) + [$1.25 x (Q1 - Q2)] 
E) $2.25 x (Q1 - Q2)

Question 6

If demand for a given good is perfectly elastic, it follows that

Accepted Answer

A) as price changes, quantity demanded does not change. 
B) as price changes, quantity demanded changes by a larger percentage. 
C) as price changes only a small percentage, quantity demanded falls to zero. 
D) as income changes only a small percentage, quantity demanded changes by a very large percentage. 
E) none of the above

Question 7

If the percentage change in quantity demanded of a good is equal to the percentage change in buyer's income, then the good is said to be

Accepted Answer

A) income elastic. 
B) income inelastic. 
C) income unit elastic. 
D) price unit elastic. 
E) price inelastic.

Question 8

If a small increase in the price of a good reduces quantity demanded to zero, demand is ________________ and the price elasticity of demand is equal to _______________.

Accepted Answer

A) perfectly inelastic; zero 
B) perfectly elastic; infinity 
C) unit elastic; one 
D) perfectly elastic; zero

Question 9

If the demand for a good is unit elastic, then

Accepted Answer

A) the percentage change in quantity demanded is greater than the percentage change in price. 
B) the percentage change in quantity demanded is less than the percentage change in price. 
C) the percentage change in quantity demanded is equal to the percentage change in price. 
D) quantity demanded is extremely responsive to changes in price. 
E) quantity demanded is not responsive to changes in price.

Question 10

Describe what cross elasticity of demand measures. Be specific in your response.

Accepted Answer

The answer of Describe what cross elasticity of demand measures....

Question 11

Assume that the buyers of good Z fall into two groups: buyers that have elastic demand and buyers that have inelastic demand. If the firm selling good Z can charge different prices to different groups of people, the firm would prefer to ______________ the price charged to the elastic group and _______________ the price charged to the inelastic group.

Accepted Answer

A) raise; lower 
B) lower; lower 
C) lower; raise 
D) raise; raise

Question 12

If good Z has an income elasticity of 1.0, then demand for good Z is income __________ and the good is __________.

Accepted Answer

A) inelastic, normal 
B) inelastic, inferior 
C) elastic, normal 
D) elastic, inferior 
E) unit elastic, normal

Question 13

A good is unit elastic in demand if as the price changes there is no resulting change in total revenue.

Accepted Answer

A) True 
 B)False

Question 14

Income elasticity of demand for good A is -0.22. Good A is income __________ and is a(n) __________ good.

Accepted Answer

A) unit elastic; normal 
B) elastic; inferior 
C) inelastic; normal 
D) elastic; normal 
E) inelastic; inferior

Question 15

Exhibit 19-3
 
-Refer to Exhibit 19-3. When price decreases from $5.50 to $4.50, the price elasticity of demand is

Accepted Answer

A) 0.2. 
B) 0.5. 
C) 1.0. 
D) 2.0. 
E) 5.0.

Question 16

If total revenue does not change as a result of a rise in the price of a given good, it follows that demand is

Accepted Answer

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

Question 17

If demand is __________, price and total revenue are __________ related; if demand is __________, price and total revenue are directly related.

Accepted Answer

A) elastic; inversely; inelastic 
B) inelastic; inversely; elastic 
C) unit elastic; not; elastic 
D) inelastic; inversely; unit elastic 
E) none of the above

Question 18

Good Z is income unit elastic. This means that the percentage change in income is

Accepted Answer

A) equal to the percentage change in the quantity demanded of good Z. 
B) greater than the percentage change in the demand for good Z. 
C) less than the percentage change in the quantity demanded of good Z. 
D) equal to the percentage change in the price of good Z. 
E) greater than the percentage change in the price of good Z.

Question 19

When a good is perfectly inelastic in demand, or perfectly elastic in supply, the buyers will pay the full tax that is placed on the sellers.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 19-4
​
 
-Refer to Exhibit 19-4. As a consequence of the depicted change in the supply of X, the demand curve for Y shifted from D1 to D2. It follows that

Accepted Answer

A) X and Y are substitutes. 
B) X and Y are complements. 
C) X and Y are inferior goods. 
D) demand for Y is price elastic.

Exam 19: Elasticity

The producer of good X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for good X is 0.75. Your best advice to the producer would be to

The price elasticity of demand tends to be higher for goods

Vernon spends the following percentages of his budget on the goods A, B, C, and D: 23 percent on good A, 11 percent on good B, 1 percent on good C, and 3 percent on good D. For which good is price elasticity of demand the highest, ceteris paribus?

The quantity demanded of good A changes from 100 to 111 when the price of good A changes from $9 to $8. The cross elasticity of demand is

Exhibit 19-2 -Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X as shown by the shift of S₁ to S₂. What is an expression for the tax revenue raised?

If demand for a given good is perfectly elastic, it follows that

If the percentage change in quantity demanded of a good is equal to the percentage change in buyer's income, then the good is said to be

If a small increase in the price of a good reduces quantity demanded to zero, demand is __ and the price elasticity of demand is equal to _.

If the demand for a good is unit elastic, then

Describe what cross elasticity of demand measures. Be specific in your response.

If good Z has an income elasticity of 1.0, then demand for good Z is income and the good is .

A good is unit elastic in demand if as the price changes there is no resulting change in total revenue.

Income elasticity of demand for good A is -0.22. Good A is income and is a(n) good.

Exhibit 19-3 -Refer to Exhibit 19-3. When price decreases from $5.50 to $4.50, the price elasticity of demand is

If total revenue does not change as a result of a rise in the price of a given good, it follows that demand is

If demand is , price and total revenue are related; if demand is __, price and total revenue are directly related.

Good Z is income unit elastic. This means that the percentage change in income is

When a good is perfectly inelastic in demand, or perfectly elastic in supply, the buyers will pay the full tax that is placed on the sellers.

Exhibit 19-4 -Refer to Exhibit 19-4. As a consequence of the depicted change in the supply of X, the demand curve for Y shifted from D₁ to D₂. It follows that

Exam 19: Elasticity

The producer of good X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for good X is 0.75. Your best advice to the producer would be to

The price elasticity of demand tends to be higher for goods

Vernon spends the following percentages of his budget on the goods A, B, C, and D: 23 percent on good A, 11 percent on good B, 1 percent on good C, and 3 percent on good D. For which good is price elasticity of demand the highest, ceteris paribus?

The quantity demanded of good A changes from 100 to 111 when the price of good A changes from $9 to $8. The cross elasticity of demand is

Exhibit 19-2 ​ -Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X as shown by the shift of S1 to S2. What is an expression for the tax revenue raised?

If demand for a given good is perfectly elastic, it follows that

If the percentage change in quantity demanded of a good is equal to the percentage change in buyer's income, then the good is said to be

If a small increase in the price of a good reduces quantity demanded to zero, demand is ________________ and the price elasticity of demand is equal to _______________.

If the demand for a good is unit elastic, then

Describe what cross elasticity of demand measures. Be specific in your response.

If good Z has an income elasticity of 1.0, then demand for good Z is income __________ and the good is __________.

A good is unit elastic in demand if as the price changes there is no resulting change in total revenue.

Income elasticity of demand for good A is -0.22. Good A is income __________ and is a(n) __________ good.

Exhibit 19-3 -Refer to Exhibit 19-3. When price decreases from $5.50 to $4.50, the price elasticity of demand is

If total revenue does not change as a result of a rise in the price of a given good, it follows that demand is

If demand is __________, price and total revenue are __________ related; if demand is __________, price and total revenue are directly related.

Good Z is income unit elastic. This means that the percentage change in income is

When a good is perfectly inelastic in demand, or perfectly elastic in supply, the buyers will pay the full tax that is placed on the sellers.

Exhibit 19-4 ​ -Refer to Exhibit 19-4. As a consequence of the depicted change in the supply of X, the demand curve for Y shifted from D1 to D2. It follows that

Exhibit 19-2 -Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X as shown by the shift of S₁ to S₂. What is an expression for the tax revenue raised?

If a small increase in the price of a good reduces quantity demanded to zero, demand is __ and the price elasticity of demand is equal to _.

If good Z has an income elasticity of 1.0, then demand for good Z is income and the good is .

Income elasticity of demand for good A is -0.22. Good A is income and is a(n) good.

If demand is , price and total revenue are related; if demand is __, price and total revenue are directly related.

Exhibit 19-4 -Refer to Exhibit 19-4. As a consequence of the depicted change in the supply of X, the demand curve for Y shifted from D₁ to D₂. It follows that