Question 1

Suppose when the price of jean-jackets increased by 10 percent,the quantity supplied increased by 16 percent.Based on this information the price elasticity of supply of jean-jackets is

Accepted Answer

A) 0.625. 
B) 6%. 
C) 1.6. 
D) 1.6%.

Question 2

If the price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?

Accepted Answer

A) It falls by 162 percent. 
B) It rises by 1.62 percent. 
C) It falls. 
D) It rises.

Question 3

If demand is inelastic,the absolute value of the price elasticity of demand is

Accepted Answer

A) one. 
B) less than one. 
C) greater than one. 
D) greater than the absolute value of the slope of the demand curve.

Question 4

An increase in the demand for green tea raises the price of green tea from $16 a pound to $20 a pound.As a result,quantity supplied increases by 30 percent.Using the midpoint formula,what is the value of the price elasticity of supply?

Accepted Answer

A) 1.35 
B) 1.875 
C) 2.22 
D) 7.5

Question 5

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

Accepted Answer

A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption. 
B) A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption. 
C) If the price of grapefruit juice rises by $1,6 more cartons of orange juice will be purchased. 
D) The demand for orange juice is 6 times greater than the demand for grapefruit juice.

Question 6

In general,a "big ticket item" such as a house or new car will

Accepted Answer

A) tend to have a more elastic demand than a lower-priced good. 
B) tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget. 
C) tend to have an inelastic demand because it has many substitutes. 
D) tend to have a more inelastic demand the more time that passes.

Question 7

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.

Question 8

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

Accepted Answer

A) less then 0.8 in absolute value. 
B) greater than 0.8 in absolute value. 
C) equal to 1 in absolute value. 
D) equal to zero because the DVD of this movie has been out for several years.

Question 9

A supply curve that is vertical

Accepted Answer

A) is perfectly elastic. 
B) is perfectly inelastic. 
C) is impossible. 
D) has an elasticity equal to 1.

Question 10

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.

Question 11

Suppose the value of the price elasticity of supply is 4.What does this mean?

Accepted Answer

A) A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. 
B) A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. 
C) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. 
D) For every $1 increase in price,quantity supplied increases by 4 units.

Question 12

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 13

Demand for a luxury item,such as a yacht,is likely to be

Accepted Answer

A) both income inelastic and price inelastic. 
B) both income elastic and price elastic. 
C) income elastic and price inelastic. 
D) income inelastic and price elastic.

Question 14

In recent years,the prices of new domestically produced cars have been falling.Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel.This information suggests that the cross-price elasticity between new cars and used cars,and the cross-price elasticity between new cars and bus travel,are negative.

Accepted Answer

A) True 
 B)False

Question 15

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.

Accepted Answer

A) cross-price elasticity;positive number 
B) cross-price elasticity;negative number 
C) price elasticity of demand;number greater than 1 (in absolute value) 
D) price elasticity of demand;number less than 1 (in absolute value)

Question 16

At a price of $8 per dozen,Chuy sells 40 dozen homemade tamales per week.When he raised his price to $12 per dozen,he still sold 40 dozen per week.Based on this information,the demand for his tamales is

Accepted Answer

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

Question 17

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3,then quantity demanded

Accepted Answer

A) will increase by 45 percent. 
B) will increase by 5 percent. 
C) will decrease by 45 percent. 
D) will decrease by 5 percent.

Question 18

Which of the following goods would have the most inelastic demand?

Accepted Answer

A) ski vacations 
B) bread 
C) luxury cars 
D) big screen TVs

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.

Question 20

The absolute value of the price elasticity of demand for telescopes is 1.5.Therefore,telescopes can be classified as a luxury.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Suppose when the price of jean-jackets increased by 10 percent,the quantity supplied increased by 16 percent.Based on this information the price elasticity of supply of jean-jackets is

If the price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?

If demand is inelastic,the absolute value of the price elasticity of demand is

An increase in the demand for green tea raises the price of green tea from $16 a pound to $20 a pound.As a result,quantity supplied increases by 30 percent.Using the midpoint formula,what is the value of the price elasticity of supply?

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

In general,a "big ticket item" such as a house or new car will

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

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

A supply curve that is vertical

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

Suppose the value of the price elasticity of supply is 4.What does this mean?

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Demand for a luxury item,such as a yacht,is likely to be

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the and get a .

At a price of $8 per dozen,Chuy sells 40 dozen homemade tamales per week.When he raised his price to $12 per dozen,he still sold 40 dozen per week.Based on this information,the demand for his tamales is

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3,then quantity demanded

Which of the following goods would have the most inelastic demand?

The income elasticity of demand measures

The absolute value of the price elasticity of demand for telescopes is 1.5.Therefore,telescopes can be classified as a luxury.