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Use the table below to answer the following questions. Table 4.1.1 Demand schedule for good A.  Price  (dollars per unit)   Quantity demanded  (units)  9.0008.002,0007.004,0006.006,0005.008,0004.0010,0003.0012,0002.0014,0001.0016,000018,000\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { (dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity demanded } \\\text { (units) }\end{array} \\\hline 9.00 & 0 \\8.00 & 2,000 \\7.00 & 4,000 \\6.00 & 6,000 \\5.00 & 8,000 \\4.00 & 10,000 \\3.00 & 12,000 \\2.00 & 14,000 \\1.00 & 16,000 \\0 & 18,000\end{array} -Refer to Table 4.1.1.The price elasticity of demand when the price rises from $6 a unit to $7 a unit is


A) 1.0.
B) 2.0.
C) 2.6.
D) 0.5.
E) 1.3.

F) A) and D)
G) D) and E)

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A fall in the price of a good from $11.50 to $8.50 results in an increase in the quantity demanded from 19,200 to 20,800 units.The price elasticity of demand is


A) 0.27.
B) 3.75.
C) 0.08.
D) 8.0.
E) 30.

F) A) and D)
G) C) and D)

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If the cross elasticity of demand between peanut butter and jelly is negative,then


A) a rise in the price of peanut butter results in a rise in the equilibrium price of jelly.
B) a rise in the price of peanut butter results in a fall in the equilibrium price of jelly.
C) a rise in the price of peanut butter has no effect on the equilibrium price of jelly.
D) a fall in the price of peanut butter results in a fall in the equilibrium price of jelly.
E) peanut butter and jelly are substitutes.

F) B) and C)
G) None of the above

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If a 10 percent increase in price results in a 9 percent increase in quantity supplied,


A) the good is a normal good.
B) the good is an inferior good.
C) supply is unit elastic.
D) supply is inelastic.
E) supply is elastic.

F) B) and E)
G) None of the above

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A given percentage rise in the price of a good is likely to result in a larger percentage decrease in the quantity of the good demanded


A) the shorter the passage of time.
B) the larger the proportion of income spent on it.
C) the harder it is to obtain good substitutes.
D) all of the above.
E) none of the above.

F) B) and E)
G) B) and D)

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Suppose a rise in the price of a good from $6.50 to $7.50 leads to a decrease in the quantity demanded from 10,500 to 9,500 units.In this range of demand,the price elasticity of demand is


A) 14.
B) 7.
C) 1,000.
D) 1.
E) 0.7.

F) A) and D)
G) B) and D)

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The demand for a good is price elastic if


A) a rise in price results in an increase in total revenue.
B) a fall in price results in a decrease in total revenue.
C) a rise in price results in a decrease in total revenue.
D) the good is a necessity.
E) the demand for the good is very insensitive to changes in price.

F) A) and D)
G) B) and C)

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Which one of the following illustrates an inelastic demand?


A) A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.
B) A 10 percent rise in price leads to a 20 percent decrease in quantity demanded.
C) A price elasticity of demand equal to infinity.
D) A price elasticity of demand equal to 1.0.
E) A price elasticity of demand equal to 2.0.

F) B) and C)
G) A) and D)

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Demand will be more inelastic the


A) higher the income level.
B) lower the income level.
C) longer the passage of time after a price increase.
D) fewer good substitutes that are available.
E) larger the fraction of income spent on the good.

F) A) and D)
G) All of the above

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The price of plums falls by 7 percent and quantity of plums demanded increases by 6.75 percent.We conclude that the demand for plums is


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

F) None of the above
G) A) and E)

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Supply is elastic if


A) a small percentage change in price results in a large percentage change in quantity supplied.
B) a large percentage change in price results in a small percentage change in quantity supplied.
C) a small percentage change in demand results in a large percentage change in quantity supplied.
D) the good is an inferior good.
E) the good is a normal good.

F) D) and E)
G) All of the above

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If the quantity of chicken demanded increases by 1.25 percent when the price of beef increases by 2.5 percent,the cross elasticity of demand between chicken and beef is


A) 3.125.
B) -3.125.
C) -0.5.
D) 2.0.
E) 0.5.

F) All of the above
G) A) and C)

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Use the table below to answer the following questions. Table 4.2.2  Price of Jolt  Price of Coke  Income Level  Jolt Sales 2006$1.00/ can $1.00/ can $25,00015,000 cases 2007$1.00/ can $1.40/ can $25,00025,000 cases 2008$1.00/ can $1.40/ can $35,00015,000 cases 2009$1.40/ can $1.40/ can $35,0005,000 cases \begin{array} { c c c c c } \hline& \text { Price of Jolt } & \text { Price of Coke } & \text { Income Level } & \text { Jolt Sales } \\\hline 2006 & \$ 1.00 / \text { can } & \$ 1.00 / \text { can } & \$ 25,000 & 15,000 \text { cases } \\2007 & \$ 1.00 / \text { can } & \$ 1.40 / \text { can } & \$ 25,000 & 25,000 \text { cases } \\2008 & \$ 1.00 / \text { can } & \$ 1.40 / \text { can } & \$ 35,000 & 15,000 \text { cases } \\2009 & \$ 1.40 / \text { can } & \$ 1.40 / \text { can } & \$ 35,000 & 5,000 \text { cases } \\\hline\end{array} -Refer to Table 4.2.2.All of the following statements regarding Jolt are true except


A) it has an elastic demand.
B) it is an inferior good.
C) it is a substitute for Coke.
D) it has a negative cross elasticity of demand with respect to Coke.
E) none of the above.

F) A) and B)
G) B) and D)

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In the nation of Transporta,the income elasticity of demand for used cars is -2.66.If incomes in this nation increase by 10 percent,


A) the quantity of used cars demanded increase by 26.6 percent.
B) used cars will be normal goods.
C) the quantity of used cars demanded decrease by 26.6 percent.
D) the demand curve for used cars shifts rightward.
E) the supply curve of used cars shifts rightward.

F) C) and D)
G) B) and C)

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Business people speak about income elasticity of demand without using the actual term.Which one of the following statements reflects income elasticity of demand?


A) "A price cut won't help me.It won't increase sales,and I'll just get less money for each unit."
B) "I don't think a price cut will make any difference to my bottom line.What I may gain from selling more I would lose on the lower price."
C) "My customers are real bargain hunters.Since I set my prices just a few cents below my competitors,customers have flocked to the store and sales are booming."
D) "With the recent economic recovery,people have more income to spend and sales are booming,even at the previous prices."
E) both A and B

F) B) and D)
G) A) and C)

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The price of oranges rises by 3 percent and quantity of oranges demanded decreases by 3 percent.We conclude that the demand for oranges is


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

F) A) and B)
G) A) and C)

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Luxury goods tend to have income elasticities of demand that are


A) greater than 1.
B) greater than zero but less than 1.
C) less than the income elasticities of demand for necessary goods.
D) negative.
E) first positive and then negative as income increases.

F) All of the above
G) B) and D)

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Total revenue is more likely to rise when the price rises if


A) there are few substitutes for the good.
B) a high proportion of income is spent on the good.
C) some extended period of time passes.
D) all of the above.
E) none of the above.

F) C) and E)
G) C) and D)

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The elasticity of supply for airplane travel one year in advance of the departure date is most likely to be


A) substantially lower than -1.
B) between -1 and zero.
C) between zero and 1.
D) around 1.
E) substantially greater than 1.

F) All of the above
G) B) and C)

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Use the figure below to answer the following question. Use the figure below to answer the following question. Figure 4.3.1 -The two supply curves in Figure 4.3.1 are parallel.Between $7 to $8, A) S<sub>1</sub> is more elastic than S<sub>2</sub>. B) S<sub>1</sub> is more inelastic than S<sub>2</sub>. C) S<sub>1</sub> and S<sub>2</sub> have the same elasticity. D) S<sub>1</sub> is steeper than S<sub>2</sub>. E) S<sub>1</sub> is flatter than S<sub>2</sub>. Figure 4.3.1 -The two supply curves in Figure 4.3.1 are parallel.Between $7 to $8,


A) S1 is more elastic than S2.
B) S1 is more inelastic than S2.
C) S1 and S2 have the same elasticity.
D) S1 is steeper than S2.
E) S1 is flatter than S2.

F) B) and D)
G) C) and D)

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