Question 1

What is the price elasticity of demand?

Accepted Answer

The answer of What is the price elasticity of demand?...

Question 2

Suppose that 50 candy bars are demanded at a particular price. Using the midpoint method, if the price of candy bars rises by four per cent, the number of candy bars demanded falls to 46 candy bars. This means that the:

Accepted Answer

A)  demand for candy bars in this price range is elastic 
B)  demand for candy bars in this price range is inelastic 
C)  price elasticity of demand for candy bars is zero 
D)  demand for candy bars is unit elastic

Question 3

A person who likes to be on the sea in a boat would tend to have what type of demand for boats?

Accepted Answer

A)  elastic 
B)  inelastic 
C)  unit elastic 
D)  weak

Question 4

Demand is unit elastic if elasticity is:

Accepted Answer

A)  less than one 
B)  equal to one 
C)  greater than one 
D)  equal to zero

Question 5

The demand for basic foodstuffs such as wheat is usually elastic.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would you expect to have the highest income elasticity of demand?

Accepted Answer

A)  an overseas travel holiday 
B)  a ticket to see a ballet performance by a renowned international act 
C)  a ticket to see a move at the local theatre 
D)  a picnic by the beach

Question 7

Graph 5-2
 
-In Graph 5-2, the elasticity of demand from point B to point C, using the midpoint method, would be:

Accepted Answer

A)  0.5 
B)  0.75 
C)  1.0 
D)  1.3

Question 8

Table 5-2
Qualities purchased
 
-Refer to Table 5-2. Using the midpoint method, what is the income elasticity of good Y?

Accepted Answer

A)  -0.75 
B)  0.75 
C)  -1.33 
D)  0

Question 9

Demand is elastic if the elasticity is greater than one.

Accepted Answer

A) True 
 B)False

Question 10

Slope is the ratio of the changes in two variables, while elasticity is the ratio of the percentage changes in two variables.

Accepted Answer

A) True 
 B)False

Question 11

Jean produces leather handbags. If the demand for leather handbags is inelastic and Jean wishes to increase her total revenue, she should:

Accepted Answer

A)  decrease the price of the handbags 
B)  increase the price of the handbags 
C)  not change the price of the handbags 
D)  manufacture plastic handbags instead

Question 12

If the price elasticity of demand is elastic, a price increase will actually reduce total revenue.

Accepted Answer

A) True 
 B)False

Question 13

Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 14

The demand for rare butterflies tends to be income:

Accepted Answer

A)  elastic because they are relatively expensive 
B)  inelastic because butterflies are small animals 
C)  elastic because most buyers feel that they can do without it 
D)  inelastic because butterflies are difficult to breed

Question 15

Graph 5-5
 
-In Graph 5-5, which supply curve is perfectly inelastic?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  it is impossible to tell without more information

Question 16

If the cross-price elasticity of demand is 1.25, then the two goods are:

Accepted Answer

A)  complements 
B)  luxuries 
C)  normal goods 
D)  substitutes

Question 17

Graph 5-1
 
-In Graph 5-1, the section of the demand curve labelled C represents the:

Accepted Answer

A)  elastic section of the demand curve 
B)  unit elastic section of the demand curve 
C)  perfectly elastic section of the demand curve 
D)  inelastic section of the demand curve

Question 18

Suppose there is a change in the price of electricity. The demand for electricity will respond to this change less over the next month than over the next two years.

Accepted Answer

A) True 
 B)False

Question 19

Economists use the concept of price elasticity of demand to measure how much:

Accepted Answer

A)  sellers respond to changes in the price of the good 
B)  worse off consumers are when the price of the good rises 
C)  demand responds to changes in buyers' incomes
D 
D)  buyers respond to changes in the price of the good

Question 20

A perfectly vertical demand curve means that demand is perfectly inelastic. The price elasticity of demand will be zero.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

What is the price elasticity of demand?

Suppose that 50 candy bars are demanded at a particular price. Using the midpoint method, if the price of candy bars rises by four per cent, the number of candy bars demanded falls to 46 candy bars. This means that the:

A person who likes to be on the sea in a boat would tend to have what type of demand for boats?

Demand is unit elastic if elasticity is:

The demand for basic foodstuffs such as wheat is usually elastic.

Which of the following would you expect to have the highest income elasticity of demand?

Graph 5-2 -In Graph 5-2, the elasticity of demand from point B to point C, using the midpoint method, would be:

Table 5-2 Qualities purchased -Refer to Table 5-2. Using the midpoint method, what is the income elasticity of good Y?

Demand is elastic if the elasticity is greater than one.

Slope is the ratio of the changes in two variables, while elasticity is the ratio of the percentage changes in two variables.

Jean produces leather handbags. If the demand for leather handbags is inelastic and Jean wishes to increase her total revenue, she should:

If the price elasticity of demand is elastic, a price increase will actually reduce total revenue.

Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price.

The demand for rare butterflies tends to be income:

Graph 5-5 -In Graph 5-5, which supply curve is perfectly inelastic?

If the cross-price elasticity of demand is 1.25, then the two goods are:

Graph 5-1 -In Graph 5-1, the section of the demand curve labelled C represents the:

Suppose there is a change in the price of electricity. The demand for electricity will respond to this change less over the next month than over the next two years.

Economists use the concept of price elasticity of demand to measure how much:

A perfectly vertical demand curve means that demand is perfectly inelastic. The price elasticity of demand will be zero.