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


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.

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Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold.Without calculating the price elasticity value,can you determine whether demand is elastic,unit-elastic,or inelastic? Explain your answer.

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The first total revenue is ($5...

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The price of wheat has fallen since 1950.Which of the following explains this price decline?


A) The price elasticity of demand is less than 1 (in absolute value) and the income elasticity of demand for wheat is low.
B) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is low.
C) The price elasticity of demand is less than 1 (in absolute value) and wheat is an inferior good.
D) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is greater than 1.

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Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?


A) Sales revenue falls.
B) Sales revenue rises.
C) Sales revenue remains unchanged.
D) It cannot be determined without information on prices.

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Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

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If at a price of $24,Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids,the demand for her orchids is


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

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Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?


A) The decrease in supply led to huge price increases.
B) Tomatoes are necessities.
C) The demand for tomatoes is price inelastic.
D) The cross-price elasticity between tomatoes and most other substitute vegetables is very low.

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If firms do not increase their quantity supplied when price changes,then supply is


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

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According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?


A) The toothpaste industry is highly competitive.
B) Toothpaste is relatively inexpensive.
C) Toothpaste is heavily endorsed by dentists.
D) There are few close substitutes for toothpaste.

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If the market for a product is broadly defined,then


A) the good has many complements.
B) there are few substitutes for the product and the demand for the product is relatively inelastic.
C) there are many substitutes for the product and the demand for the product is relatively elastic.
D) the expenditure on the good is likely to make up a large share of one's budget.

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Table 6-1 Table 6-1 -Refer to Table 6-1.Over what range of prices is the demand inelastic? A) over the entire range of prices B) between $12 and $16 C) between $8 and $16 D) between $2 and $8 -Refer to Table 6-1.Over what range of prices is the demand inelastic?


A) over the entire range of prices
B) between $12 and $16
C) between $8 and $16
D) between $2 and $8

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Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peets' Coffee.


A) hot beverages, coffee, Peets' Coffee
B) Peets' Coffee, coffee, hot beverages
C) coffee, Peets' Coffee, hot beverages
D) coffee, hot beverages, Peets' Coffee

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


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

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Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?


A) The more elastic the supply curve, the greater the price increase.
B) The more elastic the supply curve, the smaller the price decrease.
C) The increase in price is not affected by the elasticity of the supply curve.
D) The decrease in price will always be proportional to the magnitude of the demand shift.

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If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.


A) 0.17
B) 0.62
C) 1.62
D) 5

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At a price of $100,Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125,9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals,using the midpoint formula.


A) 2
B) 1.25
C) 0.9
D) 0.75

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Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million gallons a day were sold.In October 2004,the price averaged $2.15 a gallon and 14 million gallons were sold.If the demand for gasoline did not shift between these two months,use the midpoint formula to calculate the price elasticity of demand.Indicate whether demand was elastic or inelastic.

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Price elasticity of demand = [(14 - 15)/...

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A service station owner in Staten Island,New York,was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price.If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline,the demand for gasoline is


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

Correct Answer

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Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?


A) The quantity demanded and total revenue remain the same.
B) The quantity demanded does not change but total revenue increases.
C) The quantity demanded and total revenue fall to zero.
D) The quantity demanded does not change but total revenue decreases.

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Cross-price elasticity of demand is calculated as the


A) percentage change in quantity demanded divided by percentage change in price of a good.
B) percentage change in quantity demanded of one good divided by percentage change in price of a different good.
C) percentage change in quantity sold divided by percentage change in buyers' incomes.
D) percentage change in quantity supplied divided by percentage change in price of a good.

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