Question 1

Suppose 50 loaves of bread are demanded at a particular price.If that price rises by 2 percent, the quantity demanded decreases to 49.5 loaves of bread.This implies:

Accepted Answer

A)  demand is elastic.
B)  demand is unit-elastic.
C)  the price elasticity of demand is equal to 2.
D)  demand is inelastic.
E)  consumers are very responsive to a price change. D

Question 2

Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units.From this we can conclude that the price elasticity of demand over this price range is equal to _____.

Accepted Answer

A)  1.2
B)  1.25
C)  0.80
D)  0.20
E)  0.5

Question 3

As income levels rose moderately last year in the San Jose area, it was observed by local realtors that housing sales increased substantially.It is clear from this information that, everything else held constant, the income elasticity of demand for houses is _____.

Accepted Answer

A)  negative and relatively low
B)  negative and relatively high
C)  positive and relatively low
D)  positive and relatively high
E)  neither positive nor negative

Question 4

Scenario 19.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10.
Given the above equation, the price elasticity of demand for noodles is _____.

Accepted Answer

A)  4
B)  0.5
C)  2
D)  2.5
E)  1.6

Question 5

If the demand for corn is elastic, then:

Accepted Answer

A)  there are not many substitutes in the consumption of corn.
B)  the price elasticity of demand for corn is greater than 1.
C)  a decrease in price will reduce total revenue for corn producers.
D)  a decrease in price will increase total revenue for corn producers.
E)  consumers will continue buying the same quantity even if price increases. B

Question 6

Since demand curves aremostly downward sloping, economists tend to ignore the negative sign when calculating the price elasticity of demand.

Accepted Answer

A) True 
 B)False  True

Question 7

If demand is unit-elastic, then a $5 decrease in price will lead to an increase in quantity demanded by 5 units.

Accepted Answer

A) True 
 B)False

Question 8

As the price of movie tickets increases, which of the following is most likely to take place?

Accepted Answer

A)  The quantity demanded for DVDs will increase
B)  The quantity of books demanded will decrease
C)  The number of Broadway tickets purchased will decrease
D)  The prices of popcorn and soda will increase
E)  The number of movies being produced will increase

Question 9

If a product has an inelastic demand, then:

Accepted Answer

A)  there is probably a long time period under consideration.
B)  as price increases, total revenue to producers decreases.
C)  an increase in the price will decrease total consumer expenditures.
D)  there are probably many complements for the good.
E)  there are probably few substitutes for the good.

Question 10

Since they are often used together, peanut butter and jelly are:

Accepted Answer

A)  substitutes and have a positive cross-price elasticity.
B)  complements and have a positive cross-price elasticity.
C)  substitutes and have a negative cross-price elasticity.
D)  complements and have a negative cross-price elasticity.
E)  inferior goods when the demand or goods is positive.

Question 11

If the demand for product R increases as the price of product S increases, then _____.

Accepted Answer

A)  consumer preferences for S have increased
B)  R and S are not related goods
C)  R and S are substitutes
D)  R and S are complements
E)  R is an inferior good

Question 12

Goods whose income elasticity of demand is greater than zero are _____.

Accepted Answer

A)  inferior goods
B)  normal goods
C)  luxury goods
D)  superior goods
E)  public goods

Question 13

Which of the following is explained by the price elasticity of demand?

Accepted Answer

A)  The effect of price changes on supply.
B)  The effect of quantity changes on supply.
C)  The effect of quantity changes on price.
D)  The effect of price changes on quantity demanded.
E)  The effect of price changes on quantity supplied.

Question 14

The demand for mansions is elastic because a small percentage change in price results in a large change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 15

The price elasticity of demand depends on how readily and easily consumers can switch their purchases from one product to another.

Accepted Answer

A) True 
 B)False

Question 16

Demand becomes more elastic as:

Accepted Answer

A)  the number of substitutes available declines.
B)  the time period becomes shorter.
C)  a good makes up a larger percentage of a consumer's budget.
D)  a product is defined more broadly.
E)  the producer has more time to respond to price changes.

Question 17

Which of the following is true with respect to the price elasticity of demand?

Accepted Answer

A)  The coefficient of price elasticity of demand will change with changes in the units of measurement (for instance, going from pounds to ounces) .
B)  Elasticity of demand will be equal to the slope of the demand curve.
C)  Elasticity measures the sensitivity of total expenditure to a change in price.
D)  Elasticity will tend to be greater for a relatively expensive product than for a cheaper one.
E)  A coefficient of 1 means that the percentage change in total expenditure is equivalent to the percentage change in price.

Question 18

Price elasticity of demand measured over a range of prices and quantities along the demand curve is _____.

Accepted Answer

A)  point elasticity
B)  arc elasticity
C)  income elasticity
D)  cross elasticity
E)  price elasticity

Question 19

If demand is relatively elastic and supply is relatively inelastic, then the incidence of a tax will fall mainly on consumers.

Accepted Answer

A) True 
 B)False

Question 20

If the percentage change in quantity demanded of a good is greater than the percentage change in price that caused it, then demand for the good is _____.

Accepted Answer

A)  inelastic
B)  relatively elastic
C)  unit-elastic
D)  perfectly inelastic
E)  perfectly elastic

Exam 33: Elasticity: Demand and Supply

Suppose 50 loaves of bread are demanded at a particular price.If that price rises by 2 percent, the quantity demanded decreases to 49.5 loaves of bread.This implies:

Correct AnswerverifiedD

Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units.From this we can conclude that the price elasticity of demand over this price range is equal to _____.

Correct AnswerverifiedShow Answer

As income levels rose moderately last year in the San Jose area, it was observed by local realtors that housing sales increased substantially.It is clear from this information that, everything else held constant, the income elasticity of demand for houses is _____.

Correct AnswerverifiedShow Answer

Scenario 19.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10. Given the above equation, the price elasticity of demand for noodles is _____.

Correct AnswerverifiedShow Answer

If the demand for corn is elastic, then:

Correct AnswerverifiedB

Since demand curves aremostly downward sloping, economists tend to ignore the negative sign when calculating the price elasticity of demand.

Correct AnswerverifiedTrue

If demand is unit-elastic, then a $5 decrease in price will lead to an increase in quantity demanded by 5 units.

Correct AnswerverifiedShow Answer

As the price of movie tickets increases, which of the following is most likely to take place?

Correct AnswerverifiedShow Answer

If a product has an inelastic demand, then:

Correct AnswerverifiedShow Answer

Since they are often used together, peanut butter and jelly are:

Correct AnswerverifiedShow Answer

If the demand for product R increases as the price of product S increases, then _____.

Correct AnswerverifiedShow Answer

Goods whose income elasticity of demand is greater than zero are _____.

Correct AnswerverifiedShow Answer

Which of the following is explained by the price elasticity of demand?

Correct AnswerverifiedShow Answer

The demand for mansions is elastic because a small percentage change in price results in a large change in quantity demanded.

Correct AnswerverifiedShow Answer

The price elasticity of demand depends on how readily and easily consumers can switch their purchases from one product to another.

Correct AnswerverifiedShow Answer

Demand becomes more elastic as:

Correct AnswerverifiedShow Answer

Which of the following is true with respect to the price elasticity of demand?

Correct AnswerverifiedShow Answer

Price elasticity of demand measured over a range of prices and quantities along the demand curve is _____.

Correct AnswerverifiedShow Answer

If demand is relatively elastic and supply is relatively inelastic, then the incidence of a tax will fall mainly on consumers.

Correct AnswerverifiedShow Answer

If the percentage change in quantity demanded of a good is greater than the percentage change in price that caused it, then demand for the good is _____.

Correct AnswerverifiedShow Answer

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Scenario 19.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x.Assume that P = $8, I = 200, and P_x= $10. Given the above equation, the price elasticity of demand for noodles is _____.

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