Question 1

Income elasticity of demand measures how

Accepted Answer

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

Question 2

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Accepted Answer

A)  increase the total revenue of wheat farmers.
B)  decrease the total revenue of wheat farmers.
C)  decrease the demand for wheat.
D)  decrease the supply of wheat.E) None of the above
F) A) and B)

Question 3

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
D)  Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.E) C) and D)
F) B) and D)

Question 4

The price elasticity of demand measures

Accepted Answer

A)  buyers' responsiveness to a change in the price of a good.
B)  the extent to which demand increases as additional buyers enter the market.
C)  how much more of a good consumers will demand when incomes rise.
D)  the movement along a supply curve when there is a change in demand.E) All of the above
F) B) and D)

Question 5

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Accepted Answer

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

Question 6

Figure 5-17 
-Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Accepted Answer

A)  increase.
B)  decrease.
C)  remain unchanged.
D)  The effect on total revenue cannot be determined from the given information.E) None of the above
F) All of the above

Question 7

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)  tablet computers
B)  leather boots
C)  lightbulbs
D)  optional textbooksE) A) and B)
F) A) and C)

Question 8

Suppose good X has a negative income elasticity of demand. This implies that good X is

Accepted Answer

A)  a normal good.
B)  a necessity.
C)  an inferior good.
D)  a luxury.E) A) and D)
F) None of the above

Question 9

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?

Accepted Answer

The answer of Table 5-3
Consider the following demand schedule. 
-Refer...

Question 10

Figure 5-12 
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A)  0.4.
B)  1.
C)  2.
D)  2.5.E) All of the above
F) None of the above

Question 11

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

Accepted Answer

The price ...

Question 12

Figure 5-7 
-Refer to Figure 5-7. For prices above $5, demand is price

Accepted Answer

A)  elastic, and raising price will increase total revenue.
B)  inelastic, and raising price will increase total revenue.
C)  elastic, and lowering price will increase total revenue.
D)  inelastic, and lowering price will increase total revenue.E) A) and B)
F) A) and C)

Question 13

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are

Accepted Answer

A)  substitutes, and have a cross-price elasticity of 0.60.
B)  complements, and have a cross-price elasticity of -0.60.
C)  substitutes, and have a cross-price elasticity of 1.67.
D)  complements, and have a cross-price elasticity of -1.67.E) All of the above
F) A) and B)

Question 14

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  time horizon.
B)  income of consumers.
C)  price elasticity of demand.
D)  importance of the good in a consumer's budget.E) None of the above
F) A) and C)

Question 15

Figure 5-13 
-Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Accepted Answer

A)  0.71.
B)  0.85.
C)  1.18.
D)  1.40.E) A) and D)
F) B) and D)

Question 16

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)  An increase in price of 2% causes a decrease in quantity demanded of 2%.
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%.
C)  A decrease in price of 2% causes a decrease in total revenue of 0%.
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%.E) B) and C)
F) A) and C)

Question 17

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Question 18

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  0.63, and supply is elastic.
B)  0.63, and supply is inelastic.
C)  1.60, and supply is elastic.
D)  1.60, and supply is inelastic.E) None of the above
F) C) and D)

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

In which of these instances is demand said to be perfectly inelastic?

Correct Answer
verified

Which of the following is likely to have the most price inelastic demand?

Correct Answer
verified

The price elasticity of demand measures

Correct Answer
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Figure 5-7 -Refer to Figure 5-7. For prices above $5, demand is price

Correct Answer
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If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Correct Answer
verified

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Correct Answer
verified

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Correct Answer
verified

Figure 5-17 -Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Correct Answer
verified

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct Answer
verified

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

Correct Answer
verified
The price ...
View Answer

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

Correct Answer
verified

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Correct Answer
verified

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?

Correct Answer
verified

Suppose good X has a negative income elasticity of demand. This implies that good X is

Correct Answer
verified

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.

Correct Answer
verified

Income elasticity of demand measures how

Correct Answer
verified

Exam 5: Elasticity and Its Application

In which of these instances is demand said to be perfectly inelastic?

Correct AnswerverifiedShow Answer

Which of the following is likely to have the most price inelastic demand?

Correct AnswerverifiedShow Answer

The price elasticity of demand measures

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7. For prices above $5, demand is price

Correct AnswerverifiedShow Answer

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Correct AnswerverifiedShow Answer

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Correct AnswerverifiedShow Answer

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Correct AnswerverifiedShow Answer

Figure 5-17 -Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Correct AnswerverifiedShow Answer

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct AnswerverifiedShow Answer

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Suppose good X has a negative income elasticity of demand. This implies that good X is

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Income elasticity of demand measures how

Correct AnswerverifiedShow Answer

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The price ...
View Answer

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