Question 1

A supermarket decides to reduce the price of its own brand of baked beans as a special offer for one week only. During this week it discovers that its total revenue on these baked beans increases. This indicates that

Accepted Answer

A)   its own brand of baked beans is inelastic with respect to price.
B)   the demand for its own brand of baked beans is inelastic with respect to income.
C)   the demand for its own brand of baked beans is elastic with respect to income.
D)   the demand for its own brand of baked beans is elastic with respect to price.
E)   its own brand of baked beans is an inferior good.

Question 2

If a family spends a large part of its total budget on food, then its demand for food tends to be

Accepted Answer

A)  inelastic
B)   elastic.
C)   cannot tell from the information given
D)   perfectly elastic.
E)   unitarily elastic. B

Question 3

Most basic foodstuffs have an income elasticity of demand which is low or negative.

Accepted Answer

A) True 
 B)False

Question 4

The government wants to reduce the consumption of electricity by 5%. The price elasticity of demand for electricity is - 0.4. The government should

Accepted Answer

A)   raise the price of electricity by 12.5%.
B)   raise the price of electricity by 2%.
C)   raise the price of electricity by 0.08%.
D)   lower the price of electricity by 0.4%.

Question 5

The university you attend needs to increase total revenue. The vice chancellor suggests that raising tuition fees by 5% will increase total revenue. However, after the tuition fee increase, total revenue actually fell. What can you infer about the price elasticity of demand for an education at your university? Why is this likely to be true? What did your university vice chancellor assume to be true about the price elasticity of demand for an education at your university?

Accepted Answer

If after tuition fees increased total re...

Question 6

Cross- price elasticity of demand for complements is positive.

Accepted Answer

A) True 
 B)False

Question 7

A supply curve has a price elasticity that is constant along it, if and only if

Accepted Answer

A)   it is a straight- line supply curve through the origin.
B)   it is a horizontal supply curve.
C)   it is a vertical supply curve.
D)   it is a downward- sloping supply curve.

Question 8

Explain the three main determinants of a good's price elasticity of demand.

Accepted Answer

Elasticity of demand is determined by:
1...

Question 9

The price elasticity of supply of butter is 0.2. The guaranteed price is originally set at £20 and the quantity produced is 1,000 tons. Which of the following quantities will represent the planned level of production for butter if the guaranteed price is reduced by 10%?

Accepted Answer

A)   2 tons
B)   980 tons
C)   200 tons
D)   800 tons
E)   20 tons

Question 10

If a firm knows that demand is inelastic, it should cut its price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 11

If price elasticity of demand is elastic then, ignoring the sign, it will have a value >1.

Accepted Answer

A) True 
 B)False

Question 12

A downward- sloping straight- line demand curve will

Accepted Answer

A)   be elastic over its whole length.
B)   have unit elasticity over its whole length.
C)   be inelastic over its whole length.
D)   become less elastic as price rises.
E)   become more elastic as price rises.

Question 13

If the cross- price elasticity between X and Y is negative, then

Accepted Answer

A)   X and Y are substitutes.
B)   consumer income has increased.
C)   X and Y are unrelated.
D)   X and Y are complements.

Question 14

The owner of a local hotdog stand has estimated that, if he lowers the price of hotdogs from £1.50 to£1.00, he will increase sales from 400 to 500 hotdogs per day. The demand for hotdogs is

Accepted Answer

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

Question 15

If speculation is destablising, a change in price resulting from a rise in demand will result in

Accepted Answer

A)   a further rise in demand and a rise in supply.
B)   a fall in demand and a fall in supply.
C)   a further rise in demand and a fall in supply.
D)   a fall in demand and a rise in supply. C

Question 16

There are two goods X and Y. In which of the following cases will good X have the most price- elastic supply?

Accepted Answer

A)   If it is less costly to shift from producing X to another product than it is to shift from Y to another product.
B)   A higher proportion of national income is spent on X than on Y.
C)   The cost of producing extra units increases more rapidly in the case of X than in the case of Y.
D)   Consumers find it easier to find alternatives for X than for Y. A

Question 17

When priced at £5.00, the same amount of money was spent on DVDs as when the price was £6.00. Therefore, demand for DVDs is

Accepted Answer

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

Question 18

Which of the following defines the price elasticity of supply?

Accepted Answer

A)   The responsiveness of quantity demanded to a change in supply
B)   The responsiveness of supply to a change in demand
C)   The responsiveness of quantity supplied to a change in income
D)   The responsiveness of quantity supplied to a change in price

Question 19

Price and total revenue are inversely related (i.e. when price rises revenue falls) when demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 20

If price elasticity of demand is inelastic then, ignoring the sign, it will have a value <1.

Accepted Answer

A) True 
 B)False

Exam 5: Business in a Market Environment

A supermarket decides to reduce the price of its own brand of baked beans as a special offer for one week only. During this week it discovers that its total revenue on these baked beans increases. This indicates that

Correct Answer
verified

If a family spends a large part of its total budget on food, then its demand for food tends to be

Correct Answer
verified
B

Most basic foodstuffs have an income elasticity of demand which is low or negative.

Correct Answer
verified

The government wants to reduce the consumption of electricity by 5%. The price elasticity of demand for electricity is - 0.4. The government should

Correct Answer
verified

Correct Answer
verified
If after tuition fees increased total re...
View Answer

Cross- price elasticity of demand for complements is positive.

Correct Answer
verified

A supply curve has a price elasticity that is constant along it, if and only if

Correct Answer
verified

Explain the three main determinants of a good's price elasticity of demand.

Correct Answer
verified
Elasticity of demand is determined by:
1...
View Answer

The price elasticity of supply of butter is 0.2. The guaranteed price is originally set at £20 and the quantity produced is 1,000 tons. Which of the following quantities will represent the planned level of production for butter if the guaranteed price is reduced by 10%?

Correct Answer
verified

If a firm knows that demand is inelastic, it should cut its price to increase revenue.

Correct Answer
verified

If price elasticity of demand is elastic then, ignoring the sign, it will have a value >1.

Correct Answer
verified

A downward- sloping straight- line demand curve will

Correct Answer
verified

If the cross- price elasticity between X and Y is negative, then

Correct Answer
verified

The owner of a local hotdog stand has estimated that, if he lowers the price of hotdogs from £1.50 to£1.00, he will increase sales from 400 to 500 hotdogs per day. The demand for hotdogs is

Correct Answer
verified

If speculation is destablising, a change in price resulting from a rise in demand will result in

Correct Answer
verified
C

There are two goods X and Y. In which of the following cases will good X have the most price- elastic supply?

Correct Answer
verified
A

When priced at £5.00, the same amount of money was spent on DVDs as when the price was £6.00. Therefore, demand for DVDs is

Correct Answer
verified

Which of the following defines the price elasticity of supply?

Correct Answer
verified

Price and total revenue are inversely related (i.e. when price rises revenue falls) when demand is inelastic.

Correct Answer
verified

If price elasticity of demand is inelastic then, ignoring the sign, it will have a value <1.

Correct Answer
verified

Exam 5: Business in a Market Environment

A supermarket decides to reduce the price of its own brand of baked beans as a special offer for one week only. During this week it discovers that its total revenue on these baked beans increases. This indicates that

Correct AnswerverifiedShow Answer

If a family spends a large part of its total budget on food, then its demand for food tends to be

Correct AnswerverifiedB

Most basic foodstuffs have an income elasticity of demand which is low or negative.

Correct AnswerverifiedShow Answer

The government wants to reduce the consumption of electricity by 5%. The price elasticity of demand for electricity is - 0.4. The government should

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf after tuition fees increased total re...View AnswerShow Answer

Cross- price elasticity of demand for complements is positive.

Correct AnswerverifiedShow Answer

A supply curve has a price elasticity that is constant along it, if and only if

Correct AnswerverifiedShow Answer

Explain the three main determinants of a good's price elasticity of demand.

Correct AnswerverifiedElasticity of demand is determined by:1...View AnswerShow Answer

The price elasticity of supply of butter is 0.2. The guaranteed price is originally set at £20 and the quantity produced is 1,000 tons. Which of the following quantities will represent the planned level of production for butter if the guaranteed price is reduced by 10%?

Correct AnswerverifiedShow Answer

If a firm knows that demand is inelastic, it should cut its price to increase revenue.

Correct AnswerverifiedShow Answer

If price elasticity of demand is elastic then, ignoring the sign, it will have a value >1.

Correct AnswerverifiedShow Answer

A downward- sloping straight- line demand curve will

Correct AnswerverifiedShow Answer

If the cross- price elasticity between X and Y is negative, then

Correct AnswerverifiedShow Answer

The owner of a local hotdog stand has estimated that, if he lowers the price of hotdogs from £1.50 to£1.00, he will increase sales from 400 to 500 hotdogs per day. The demand for hotdogs is

Correct AnswerverifiedShow Answer

If speculation is destablising, a change in price resulting from a rise in demand will result in

Correct AnswerverifiedC

There are two goods X and Y. In which of the following cases will good X have the most price- elastic supply?

Correct AnswerverifiedA

When priced at £5.00, the same amount of money was spent on DVDs as when the price was £6.00. Therefore, demand for DVDs is

Correct AnswerverifiedShow Answer

Which of the following defines the price elasticity of supply?

Correct AnswerverifiedShow Answer

Price and total revenue are inversely related (i.e. when price rises revenue falls) when demand is inelastic.

Correct AnswerverifiedShow Answer

If price elasticity of demand is inelastic then, ignoring the sign, it will have a value <1.

Correct AnswerverifiedShow Answer

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B

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If after tuition fees increased total re...
View Answer

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Elasticity of demand is determined by:
1...
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C

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A

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