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Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

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The measure of how willing consumers are to buy less of a good as its price rises is called

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price elas...

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Figure 5-2 Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand? A) D1 B) D2 C) D3 D) All of the above are equally elastic. -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?


A) D1
B) D2
C) D3
D) All of the above are equally elastic.

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

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The price elasticity of demand for a good measures the willingness of


A) consumers to buy less of the good as price rises.
B) consumers to avoid monopolistic markets in favor of competitive markets.
C) firms to produce more of a good as price rises.
D) firms to respond to the tastes of consumers.

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

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Figure 5-5 Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of A) $20 and $40. B) $40 and $50. C) $40 and $60. D) $50 and $70. -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of


A) $20 and $40.
B) $40 and $50.
C) $40 and $60.
D) $50 and $70.

E) A) and C)
F) A) and B)

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If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about


A) 0.2%.
B) 0.5%.
C) 2.0%.
D) 4.5%.

E) A) and D)
F) B) and D)

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Income elasticity of demand measures how


A) the quantity demanded changes as consumer income changes.
B) consumer purchasing power is affected by a change in the price of a good.
C) the price of a good is affected when there is a change in consumer income.
D) many units of a good a consumer can buy given a certain income level.

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

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Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

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Since Adam wants 10 tickets regardless o...

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If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

A) True
B) False

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Table 5-4 The following table shows the demand schedule for a particular good. Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is A) 0.4 B) 1 C) 1.5 D) 2.33 -Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is


A) 0.4
B) 1
C) 1.5
D) 2.33

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

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Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about


A) 1.5% in the short run and 6% in the long run.
B) 6% in the short run and 1.5% in the long run.
C) 16.7% in the short run and 4.2% in the long run.
D) 4.2% in the short run and 16.7% in the long run.

E) B) and C)
F) A) and D)

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Goods with many close substitutes tend to have


A) more elastic demands.
B) less elastic demands.
C) price elasticities of demand that are unit elastic.
D) income elasticities of demand that are negative.

E) A) and C)
F) B) and C)

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Table 5-3 Consider the following demand schedule. Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, between which two prices is price elasticity of demand most inelastic? -Refer to Table 5-3. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

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Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

A) True
B) False

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If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about


A) 0.5, and supply is elastic.
B) 0.5, and supply is inelastic.
C) 2, and supply is inelastic.
D) 2, and supply is elastic.

E) A) and B)
F) C) and D)

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Figure 5-4 Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the A) elastic section of the demand curve. B) inelastic section of the demand curve. C) unit elastic section of the demand curve. D) perfectly elastic section of the demand curve. -Refer to Figure 5-4. The section of the demand curve from A to B represents the


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

E) A) and B)
F) A) and C)

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OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to


A) an inelastic demand for oil and a reduction in the amount of oil supplied.
B) a reduction in the amount of oil supplied and a world-wide oil embargo.
C) a world-wide oil embargo and an elastic demand for oil.
D) a reduction in the amount of oil supplied and an elastic demand for oil.

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

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Scenario 5-6 Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-6. Using the midpoint method, what is the income elasticity of demand for mobile service?

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An advance in farm technology that results in an increased market supply is


A) good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food.
B) bad for farmers because total revenue will fall but good for consumers because prices for food will fall.
C) good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption.
D) bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

E) C) and D)
F) A) and B)

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Figure 5-18 Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6? A) 0.60 B) 0.64 C) 1.57 D) 1.67 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?


A) 0.60
B) 0.64
C) 1.57
D) 1.67

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

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