question
The price elasticity of demand reflects the responsiveness of
a. how firms respond to changes in demand.
b. demand to a change in price of a substitute good.
c. demand to a change in price.
d. quantity demanded to a change in price.
a. how firms respond to changes in demand.
b. demand to a change in price of a substitute good.
c. demand to a change in price.
d. quantity demanded to a change in price.
answer
d. quantity demanded to a change in price.
question
Suppose that you have a budget of $20 for movies every month. You seethe same number of movies every month no matter what happens to the price of movies. This suggests that your demand for movies is
a. very elastic.
b. very inelastic.
c. unitary elastic.
d. not something that can be characterized without knowing the prices of the movies.
a. very elastic.
b. very inelastic.
c. unitary elastic.
d. not something that can be characterized without knowing the prices of the movies.
answer
b. very inelastic.
question
Suppose that in a month the price of pizza increases from $4 to $5. At the same time, the quantity of pizzas demanded decreases from 200 to190. The price elasticity of demand for pizza (calculated using the initial value formula) is
a. 0.1
b. 0.2
c. 1
d. 10
a. 0.1
b. 0.2
c. 1
d. 10
answer
b. 0.2
question
Suppose that in a month the price of coffee mugs increases from $1 to$2. At the same time, the quantity of coffee mugs demanded decreases from 100 to 80. The price elasticity of demand for coffee mugs(calculated using the initial value formula) is
a. 0.2
b. 0.5
c. 5
d. 20
a. 0.2
b. 0.5
c. 5
d. 20
answer
a. 0.2
question
Suppose that in a month the price of roses increases from $1 to $1.50.At the same time, the quantity of roses demanded decreases from 200 to190. Elasticity of demand for roses (calculated using the initial value formula) is
a. 0.1
b. 0.5
c. 10
d. 20
a. 0.1
b. 0.5
c. 10
d. 20
answer
a. 0.1
question
If the price elasticity of demand is very elastic, which of the following could be a possible value of the elasticity?
a. 3
b. 1
c. 1/2
d. 0
a. 3
b. 1
c. 1/2
d. 0
answer
a. 3
question
When the price of a Toyota Celica increases by $10 the quantity demanded hardly changes. When the price of a Santana CD increases by $10 the quantity demanded falls dramatically. This suggests that
a. Santana CD's have more elastic demand than Toyota Celicas, although both are elastic.
b. Toyota Celicas have less elastic demand than Santana CDs, although both are in elastic.
c. Santana CD's have very elastic demand and Toyota Celicas have very inelastic demand.
d. Not enough information is given to draw any of the above conclusions about demand elasticities.
a. Santana CD's have more elastic demand than Toyota Celicas, although both are elastic.
b. Toyota Celicas have less elastic demand than Santana CDs, although both are in elastic.
c. Santana CD's have very elastic demand and Toyota Celicas have very inelastic demand.
d. Not enough information is given to draw any of the above conclusions about demand elasticities.
answer
d. Not enough information is given to draw any of the above conclusions about demand elasticities.
question
If a product has a great many identical substitutes, demand for the product is most likely to be
a. very inelastic.
b. inelastic.
c. elastic.
d. very elastic.
a. very inelastic.
b. inelastic.
c. elastic.
d. very elastic.
answer
d. very elastic.
question
If a product is a necessity and has no substitute at all, demand for the product is most likely to be
a. very inelastic.
b. inelastic.
c. unitary elastic.
d. elastic.
a. very inelastic.
b. inelastic.
c. unitary elastic.
d. elastic.
answer
a. very inelastic.
question
Demand for low budget items, such as candy, is generally _____________ than demand for large budget items, such as automobiles.
a. higher
b. lower
c. more elastic
d. less elastic
a. higher
b. lower
c. more elastic
d. less elastic
answer
d. less elastic
question
Which of the following products has the most elastic demand?
a. Raspberry Mocha Kona coffee blend at Starbuck's
b. Starbuck's coffee
c. coffee
d. all beverages
a. Raspberry Mocha Kona coffee blend at Starbuck's
b. Starbuck's coffee
c. coffee
d. all beverages
answer
a. Raspberry Mocha Kona coffee blend at Starbuck's
question
If consumers have a long time to respond to an increase in electricity prices, their demand is likely to be ________ than if they are only given a short time.
a. no different
b. higher
c. more elastic
d. less elastic
a. no different
b. higher
c. more elastic
d. less elastic
answer
c. more elastic
question
On a linear demand curve, demand is ______ at low quantities than it is at the middle of the demand curve.
a. more elastic
b. less elastic
c. equally elastic
d. impossible to tell
a. more elastic
b. less elastic
c. equally elastic
d. impossible to tell
answer
a. more elastic
question
Suppose that the elasticity of demand for a product is 4.0 and price decreases by 20%. By what percentage will quantity demanded increase?
a. 5%
b. 20%
c. 80%
d. 200%
a. 5%
b. 20%
c. 80%
d. 200%
answer
c. 80%
question
Suppose we observe that as a firm increases its price its total revenue decreases. What do we know?
a. demand is price inelastic
b. demand is price elastic
c. demand is unitary elastic
d. demand is perfectly price inelastic
a. demand is price inelastic
b. demand is price elastic
c. demand is unitary elastic
d. demand is perfectly price inelastic
answer
b. demand is price elastic
question
If the demand for school ball caps is inelastic, an increase in price will
a. decrease profits.
b. increase total revenues.
c. decrease total revenues.
d. increase quantity demanded.
a. decrease profits.
b. increase total revenues.
c. decrease total revenues.
d. increase quantity demanded.
answer
b. increase total revenues.
question
If quantity demanded of a good falls by 2 percent when income falls by10 percent, the good's demand is
a. price sensitive.
b. income inelastic.
c. income elastic.
d. price insensitive.
a. price sensitive.
b. income inelastic.
c. income elastic.
d. price insensitive.
answer
b. income inelastic.
question
The cross elasticity of demand between orange juice and grapefruit juice is most likely
a. positive.
b. negative.
c. zero.
d. no way to tell.
a. positive.
b. negative.
c. zero.
d. no way to tell.
answer
a. positive.
question
When the price of hamburger went from 3 to 4 dollars a pound, the quantity demanded of buns changed from 30 to 25 packages a day. The cross elasticity of demand for buns (using the initial value formula) is
a. 1.4
b. 0.5
c. -0.5
d. -1.4
a. 1.4
b. 0.5
c. -0.5
d. -1.4
answer
c. -0.5
question
If the price elasticity of supply is 1, supply is
a. unaffected by price changes.
b. inelastic.
c. unitary elastic.
d. elastic.
a. unaffected by price changes.
b. inelastic.
c. unitary elastic.
d. elastic.
answer
c. unitary elastic.
question
The supply curve will be more elastic when
a. a good has many substitutes.
b. demand is elastic.
c. demand is inelastic.
d. firms have more time in which to respond to the price change.
a. a good has many substitutes.
b. demand is elastic.
c. demand is inelastic.
d. firms have more time in which to respond to the price change.
answer
d. firms have more time in which to respond to the price change.
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