Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true?
All consumers in the market have a high demand for avocados.
Avocados are in large supply in the market.
Mary has an inelastic demand for avocados.
Mary has an elastic demand for avocados.
The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk?
–0.67
–1.5
1.5
0.67
When the absolute value of the price elasticity of demand is greater than 1, demand is:
elastic.
perfectly inelastic.
unit elastic.
inelastic.
When the absolute value of the price elasticity of demand is less than 1, demand is:
perfectly elastic.
inelastic.
elastic.
unit elastic.
When the absolute value of the price elasticity of demand is infinite, demand is:
elastic.
inelastic.
perfectly inelastic.
perfectly elastic.
The price elasticity of demand for a good with a vertical demand curve is:
perfectly inelastic.
perfectly elastic.
elastic.
inelastic.
The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____.
2.5; elastic
2.5; inelastic
0.4; elastic
0.4; inelastic
Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____.
infinity; perfectly elastic
0; perfectly elastic
0; perfectly inelastic
infinity; perfectly inelastic
You are given data on four products — toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand?
toothpaste
soap
laundry detergent
shampoo
If an item is a necessity rather than a luxury, its demand curve will be:
perfectly inelastic.
perfectly elastic.
relatively flat.
relatively steep.
Suppose the price of gasoline rises. As time passes, people adjust to the higher price, and the demand for gasoline becomes:
higher.
more elastic.
more inelastic.
steeper.
If demand is _____, a higher price yields _____ total revenue.
inelastic; lower
elastic; no change in
inelastic; higher
elastic; higher
The cross-price elasticity of demand measures how responsive the:
price of a good is to a change in the price of another good.
demand for one good is to a change in the demand for another good.
demand for one good is to a change in the price of another good.
supply of one good is to a change in the price of another good.
–1.33; complements (40%/-30%) (*negative number means complements*)
The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____.
–0.75; substitutes
1.25; complements
–1.25; complements
–1.33; complements
The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____.
–2; substitutes
0.5; substitutes
2; substitutes
1.5; complements
Taking the absolute value of the income elasticity of demand is incorrect because it would:
remove the ability to tell whether the two products have inelastic demand or elastic demand.
cause the value of the cross-price elasticity of demand to become smaller.
remove the ability to tell whether the product is an inferior good or a normal good.
cause the value of the cross-price elasticity of demand to become zero.
If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is:
–0.5.
–2.
2.
0.5.
The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs?
0.5
0.37
2.7
2
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