Deck 5: Elasticity of Demand and Supply

Question 1

If elasticity for a product is 2 and demand increases by 10 percent,what was the percent price change for this product?

A)an increase of 2 percent
B)a decrease of 2 percent
C)an increase of 10 percent
D)a decrease of 5 percent
E)an increase of 5 percent

Answer 1

D

Question 2

In economics,elasticity means _____

A)responsiveness to price changes.
B)shifts in demand.
C)shifts in supply.
D)how many goods money can buy.
E)how corporations maximize their revenue.

Answer 2

A

Question 3

If the price elasticity of demand for a product is 5,and prices increase 10 percent,then demand will _____

A)increase by 5 percent.
B)increase by 10 percent.
C)increase by 50 percent.
D)decrease by 50 percent.
E)decrease by 3 percent.

Answer 3

D

Question 4

Table 5.1
$$\begin{array} { | l | l | } \hline \text { Quantity Demanded } & \text { Price } \\\hline 10 & \$ 50 \\\hline 20 & \$ 40 \\\hline 30 & \$ 30 \\\hline 40 & \$ 20 \\\hline 50 & \$ 10 \\\hline\end{array}$$

-Refer to Table 5.1.If price increases from $10 to $30,the price elasticity of demand is _____

A)10.
B)5.
C)3.3.
D)3.
E)0.5.

Question 5

Table 5.1
$$\begin{array} { | l | l | } \hline \text { Quantity Demanded } & \text { Price } \\\hline 10 & \$ 50 \\\hline 20 & \$ 40 \\\hline 30 & \$ 30 \\\hline 40 & \$ 20 \\\hline 50 & \$ 10 \\\hline\end{array}$$

-Refer to Table 5.1.If price decreases from $50 to $30,the price elasticity of demand is _____

A)10.
B)5.
C)3.3.
D)3.
E)0.5.

Question 6

The price elasticity of demand is calculated as _____

A)the percentage change in quantity demanded divided by the percentage change in price.
B)the percentage change in price divided by the percentage change in quantity demanded.
C)the absolute change in quantity demanded divided by the absolute change in price.
D)the absolute change in price divided by the absolute change in quantity demanded.
E)price multiplied by quantity demanded at that price.

Question 7

If quantity increases by 15 percent when prices decrease 5 percent,then elasticity for this product is _____

A)15.
B)10.
C)5.
D)3.
E)1.

Question 8

The price elasticity of demand is defined as _____

A)the percentage change in price divided by the percentage change in quantity demanded.
B)the percentage change in quantity demanded divided by the percentage change in price.
C)the change in quantity demanded divided by the change in price.
D)the change in price divided by the change in quantity demanded.
E)the quantity demanded divided by the price.

Question 9

If the price elasticity of demand for a product is 5,and prices decrease 10 percent then demand will _____

A)increase by 5 percent.
B)increase by 10 percent.
C)increase by 50 percent.
D)decrease by 50 percent.
E)decrease by 3 percent.

Question 10

The price elasticity of demand is typically referred to as a/an _____

A)absolute value.
B)negative value.
C)positive value.
D)number greater than 1.
E)number less than 1.

Question 11

If the price of a product increases from $15 to $17 per unit and the quantity demanded decreases from 75 to 50 units,then the price elasticity of demand for this product is _____

A)3.2.
B)12.5.
C)17.
D)2.
E)40.

Question 12

Which of the following is assumed to be constant while calculating the price elasticity of demand?

A)the price of the product itself
B)the quantity demanded of the product
C)total revenue received from the sale of the product
D)the prices of all other products
E)the cost of production

Question 13

If quantity decreases by 15 percent when prices increase 5 percent,then elasticity for this product is _____

A)15.
B)10.
C)5.
D)3.
E)1.

Question 14

What does price elasticity of demand measure?

A)slope of supply curve at a given price point
B)shifts of demand curve because of changes in price
C)shifts of supply curve because of changes in price
D)how sensitive changes in quantity supplied are to changes in price
E)how sensitive changes in quantity demanded are to changes in price

Question 15

If elasticity for a product is 2 and demand decreases by 10 percent,what was the percent price change for the product?

A)an increase of 2 percent
B)a decrease of 2 percent
C)an increase of 10 percent
D)a decrease of 5 percent
E)an increase of 5 percent

Question 16

The price elasticity of demand is useful because it measures the responsiveness of _____ to changes in _____.

A)taxpayers; demand
B)producers; supply
C)consumers; price
D)consumers; demand
E)producers; income

Question 17

Table 5.2
$\begin{array}{c}\begin{array}{lll}\\ \text {Old}\\ \text {New}\end{array}\begin{array}{lll}\text {Quantity}\\\hline 20\\10\end{array}\begin{array}{lll}\text{ Price}\\\hline \$ 40 \\ \$ 60 \end{array}\end{array}$



-Refer to Table 5.2,which shows the change in the quantity demanded for a product as a result of a change in the price of the product.Use the information to calculate the value of the price elasticity of demand.

A)?2/3
B)?1/3
C)?3/5
D)?5/3
E)0

Question 18

Table 5.1
$$\begin{array} { | l | l | } \hline \text { Quantity Demanded } & \text { Price } \\\hline 10 & \$ 50 \\\hline 20 & \$ 40 \\\hline 30 & \$ 30 \\\hline 40 & \$ 20 \\\hline 50 & \$ 10 \\\hline\end{array}$$

-Refer to Table 5.1.If price decreases from $50 to $40,the price elasticity of demand is _____

A)10.
B)5.
C)3.3.
D)3.
E)0.5.

Question 19

If the price of Coca-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans,then the value of the price elasticity of demand for Coca-Cola is _____

A)0.5.
B)0.25.
C)1.
D)3.
E)2.

Question 20

Table 5.1
$$\begin{array} { | l | l | } \hline \text { Quantity Demanded } & \text { Price } \\\hline 10 & \$ 50 \\\hline 20 & \$ 40 \\\hline 30 & \$ 30 \\\hline 40 & \$ 20 \\\hline 50 & \$ 10 \\\hline\end{array}$$

-Refer to Table 5.1.If price increases from $10 to $20,the price elasticity of demand is _____

A)10.
B)5.
C)3.3.
D)3.
E)0.5.

Question 21

Table 5.2
$\begin{array}{c}\begin{array}{lll}\\ \text {Old}\\ \text {New}\end{array}\begin{array}{lll}\text {Quantity}\\\hline 20\\10\end{array}\begin{array}{lll}\text{ Price}\\\hline \$ 40 \\ \$ 60 \end{array}\end{array}$



-If the price elasticity of demand is ?0.5,then a _____

A)1 percent decrease in quantity demanded leads to a 0.5 percent decrease in price.
B)1 percent decrease in price leads to a 0.5 percent increase in quantity demanded.
C)50 percent decrease in price leads to a 1 percent increase in quantity demanded.
D)50 percent decrease in price leads to a 100 percent increase in quantity demanded.
E)50 percent decrease in quantity demanded leads to a 1 percent decrease in price.

Question 22

If the price of Coca-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans,then the demand for Coca-Cola is _____

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

Question 23

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then the value of the price elasticity of demand is _____

A)−1/3.
B)−2 1/3.
C)−1/4.
D)−3.
E)−2/3.

Question 24

When agricultural production increases,the total amount paid for agricultural products tends to _____

A)increase because demand is perfectly elastic.
B)decrease because demand is price elastic.
C)increase because demand is price inelastic.
D)decrease because demand is price inelastic.
E)remain constant because demand is price inelastic.

Question 25

Unit-elastic demand occurs when _____

A)a one-unit increase in price leads to a one-unit decrease in quantity demanded.
B)a 1 percent increase in price leads to a one-unit decrease in quantity demanded.
C)the price elasticity of demand is negative.
D)the price elasticity of demand is exactly zero.
E)the price elasticity of demand is exactly 1.

Question 26

Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state)if the U.S.demand for wheat is _____

A)inelastic.
B)elastic.
C)unit elastic.
D)downward sloping.
E)perfectly elastic.

Question 27

Demand is inelastic only if the price elasticity of demand has an absolute value _____

A)of 1.
B)greater than 1.
C)greater than 0 but less than 1.
D)less than 0.
E)greater than 5.

Question 28

Elasticity is always _____

A)measured in dollars.
B)measured in cents.
C)measured in units of quantity.
D)measured in pounds.
E)independent of the units of measurement for price and quantity.

Question 29

The important aspect measured by elasticity is _____

A)responsiveness.
B)happiness.
C)bonus.
D)profit.
E)surplus.

Question 30

If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded,demand is _____

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

Question 31

Demand is inelastic if _____

A)the percentage change in price is greater than the percentage change in quantity demanded.
B)the percentage change in price is less than the percentage change in quantity demanded.
C)the percentage change in price is equal to the percentage change in quantity demanded.
D)the absolute value of price elasticity is equal to 1.
E)the absolute value of price elasticity is greater than 1.

Question 32

Table 5.3
$$\begin{array} { c c c } & \text { Quantity } & \text { Price } \\ \text { Good A } & 100 & \$ 10 \\& 120 & \$ 9 \\\\\text { Good B } & 200 & \$ 20 \\& 140 & \$ 35\end{array}$$

-Refer to Table 5.3,which shows the change in the quantity demanded for Good A and Good B as a result of the change in their price.Use the information to calculate the price elasticity of demand for Good A.

A)?5/2
B)?11/3
C)?3/10
D)?10/3
E)?19/11

Question 33

Table 5.3
$$\begin{array} { c c c } & \text { Quantity } & \text { Price } \\ \text { Good A } & 100 & \$ 10 \\& 120 & \$ 9 \\\\\text { Good B } & 200 & \$ 20 \\& 140 & \$ 35\end{array}$$

-Refer to Table 5.3,which shows the change in the quantity demanded for Good A and Good B as a result of the change in their price.Use the information to calculate the value of the price elasticity of demand for Good B.

A)?2/3
B)?1/6
C)?1/2
D)?11/17
E)?17/11

Question 34

Table 5.4
$$\begin{array}{l}\quad\quad\quad\quad\quad\underline{\text { Restaurant Meals}}\\\begin{array} { c c c } \begin{array} { c } \text { Quantity } \\\text { supplied }\end{array} & \begin{array} { c } \text { Quantity } \\\text { demanded }\end{array} & \text { Price } \\\hline 100 & 200 & \$ 10 \\150 & 150 & \$ 20\end{array}\end{array}$$

-Refer to Table 5.4,which shows the quantity supplied and the quantity demanded for restaurant meals at different prices.Use the information to calculate the value of the price elasticity of demand for restaurant meals.

A)?1/2
B)?5/3
C)?3/5
D)?3/7
E)?7/3

Question 35

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then the demand is _____

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

Question 36

Suppose consumers spent $42 million on Christmas trees last year,when the average tree cost was $30.This year they spend $42 million,when the average tree costs $25.Assume that everything else remains constant.This data suggests that _____

A)consumers bought the same number of Christmas trees this year as last year.
B)the price of the Christmas trees stayed the same.
C)total revenue to tree producers rose this year.
D)the demand for trees is unit elastic.
E)the demand for trees is inelastic.

Question 37

Elasticity measures _____

A)the ability of a firm to introduce new products.
B)the strength of an economy's tendency to recover from recession.
C)the responsiveness of decision makers to changes in price, income, and other variables.
D)the profitability of investment in an industry.
E)the long-run price trends in an economy.

Question 38

Demand is unit elastic whenever _____

A)price elasticity has an absolute value of 1.
B)price elasticity has an absolute value greater than 1.
C)price elasticity has an absolute value less than 1.
D)price elasticity is negative.
E)consumers do not respond to a change in price.

Question 39

If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units,then demand is _____

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

Question 40

The price elasticity of demand for milk when quantity is measured in gallons will be _____ the price elasticity when quantity is measured in quarts.

A)the same as
B)four times
C)one-fourth of
D)two times
E)less than

Question 41

A university administration's decision to raise tuition in order to increase revenue will be successful if _____

A)the demand curve slopes downward.
B)demand is elastic.
C)demand is inelastic.
D)supply is elastic.
E)supply is inelastic.

Question 42

The total revenue from selling trucks is equal to _____

A)the price of a truck times the quantity sold.
B)the change in quantity sold divided by the change in price.
C)average cost times the quantity produced.
D)the price of a truck times the quantity produced.
E)the price of a truck times the price elasticity of demand.

Question 43

If demand is unit elastic,a price reduction will _____

A)increase revenues.
B)reduce revenues.
C)reduce total cost.
D)have no effect on revenues.
E)increase profits.

Question 44

One group of people uses the New York City subways only during the rush hour to travel to and from work.Another group uses them only at midday for leisure activity.If New York City wants to increase transit fares with the smallest possible reduction in revenue,for which group should it increase the fare?

A)the rush-hour group, because its demand for subway service is more elastic than that of the mid-day group
B)the rush-hour group, because its demand for subway service is less elastic than that of the mid-day group
C)the mid-day group, because its demand for subway service is more elastic than that of the rush-hour group
D)the mid-day group, because its demand for subway service is less elastic than that of the rush-hour group
E)It doesn't matter, because both groups have the same elasticity of demand.

Question 45

Identify a statement that is true about a linear demand curve.

A)Along a linear demand curve, both the slope and price elasticity are constant.
B)Along a linear demand curve, the price elasticity is constant, but the slope varies.
C)Along a linear demand curve, total revenues are constant.
D)Along a linear demand curve, the slope is constant, but the price elasticity varies.
E)Along a linear demand curve, total revenues are negative.

Question 46

If demand is price elastic,total revenue is _____

A)directly related to quantity demanded.
B)inversely related to quantity demanded.
C)directly related to price.
D)directly related to price and inversely related to quantity demanded.
E)not related to either price or to quantity demanded.

Question 47

The price elasticity of demand helps determine the effect of price changes on a firm's _____

A)property tax.
B)profit.
C)total output.
D)total revenue.
E)total cost.

Question 48

The demand for a good is elastic if _____

A)an increase in price leads to a decrease in total revenue.
B)an increase in price leads to an increase in total revenue.
C)an increase in price causes no change in total revenue.
D)a decrease in price causes no changes in total revenue.
E)a decrease in price leads to a decrease in total revenue.

Question 49

Which of the following is correct regarding total revenue?

A)TR = p + q
B)q = p / TR
C)TR = p/q
D)TR = p x q
E)p = q / TR

Question 50

If a price reduction leads to an increase in total revenue,demand is _____

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

Question 51

Which of the following determines a firm's revenue when it changes the price of its product?

A)the firm's cost function
B)the elasticity of the firm's total product curve
C)the plant size used by the firm in the long run
D)the price elasticity of demand for the firm's product
E)the price elasticity of supply

Question 52

Exhibit 5.2

Refer to Exhibit 5.2 which shows a demand curve,D.D is a(n)_____

A)upward-sloping demand curve.
B)linear demand curve.
C)perfectly elastic demand curve.
D)unit-elastic demand curve.
E)perfectly inelastic demand curve.

Question 53

If city officials expect that an increase in bus fares will raise mass transit revenues,they must think that the demand for bus travel is _____

A)elastic.
B)unit elastic.
C)inelastic.
D)upward-sloping.
E)perfectly elastic.

Question 54

Which of the following describes a situation in which demand must be inelastic?

A)Total revenue decreases by 10 percent when the price of spats rises by 10 percent.
B)Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent.
C)Total revenue increases by more than 10 percent when the price of spats rises by 10 percent.
D)Total revenue decreases by $10 when the price of spats rises by $10.
E)Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 55

Table 5.2
$\begin{array}{c}\begin{array}{lll}\\ \text {Old}\\ \text {New}\end{array}\begin{array}{lll}\text {Quantity}\\\hline 20\\10\end{array}\begin{array}{lll}\text{ Price}\\\hline \$ 40 \\ \$ 60 \end{array}\end{array}$



-Refer to Table 5.2,which shows the price and quantity combinations for a product.The demand for the good is _____,and an increase in the price of the product from $40 to $60 per unit will _____ total revenue.

A)unit elastic; increase
B)elastic; decrease
C)unit elastic; not change
D)inelastic; increase.
E)elastic; decrease.

Question 56

If a firm raises the price of its product,its total revenue will _____

A)always increase.
B)increase only if demand is price inelastic.
C)increase only if demand is price elastic.
D)remain constant regardless of the price elasticity of demand.
E)never increase.

Question 57

Exhibit 5.1

Refer to Exhibit 5.1,which shows the demand curve for a firm.The total revenue at point a is _____

A)$4.
B)$5.
C)$10.
D)$50.
E)$100.

Question 58

Suppose the price elasticity of demand for your economics textbook is −1.If the publisher raises the price by 5 percent,then _____

A)revenues will rise by 5 percent.
B)quantity demanded will rise by 5 percent.
C)total revenue will not change.
D)revenues will fall by 1 percent.
E)revenues will fall by 5 percent.

Question 59

A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if _____

A)demand is elastic.
B)supply is inelastic.
C)demand falls.
D)demand is inelastic.
E)supply is unit elastic.

Question 60

Along a linear demand curve,as the price increases from zero,_____

A)demand decreases.
B)demand increases.
C)quantity demanded increases.
D)total revenue first increases but eventually decreases.
E)total revenue first decreases but eventually increases.

Question 61

Exhibit 5.3

Refer to Exhibit 5.3,which shows a linear demand curve.Between points A and B,the demand is _____

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

Question 62

Exhibit 5.5

Refer to Exhibit 5.5,which shows the total revenue curve for a firm.Which of the following statements is true at a quantity of 10?

A)Demand is elastic.
B)Demand is inelastic.
C)Demand is unit elastic.
D)Demand is perfectly inelastic.
E)Demand is perfectly elastic.

Question 63

Exhibit 5.3

Refer to Exhibit 5.3,which shows a linear demand curve.As you move from point A to point B along the demand curve,total revenue _____ and the demand is _____.

A)stays the same; unitary
B)decreases; inelastic
C)increases; elastic
D)decreases; elastic
E)increases, inelastic

Question 64

Which of the following statements is false?

A)A perfectly elastic demand curve is a constant-elasticity demand curve.
B)A linear demand curve with a slope of −4 is a constant-elasticity demand curve.
C)A perfectly inelastic demand curve is a constant-elasticity demand curve.
D)Total revenue increases along a unit-elastic demand curve.
E)The elasticity value for a perfectly elastic demand curve is zero.

Question 65

Exhibit 5.3

Refer to Exhibit 5.3 which shows a linear demand curve.As you move from point B to point C along the demand curve,total revenue _____ and the demand is _____.

A)stays the same; unitary
B)decreases; inelastic
C)increases; elastic
D)decreases; elastic
E)increases, inelastic

Question 66

Exhibit 5.4

Refer to Exhibit 5.4,which shows a downward-sloping linear demand curve.Which of the following is true between points g and h?

A)Total revenue remains constant at $180.
B)Total revenue falls by $12.
C)Total revenue falls by $60.
D)Total revenue falls by $180.
E)Total revenue increases by $300.

Question 67

Exhibit 5.4

Refer to Exhibit 5.4,which shows a downward-sloping linear demand curve.Demand is unit elastic _____

A) between points a and d.
B) between points d and e.
C) between points e and g.
D) at the top portion of the curve.
E) anywhere along the curve.

Question 68

Exhibit 5.3

Refer to Exhibit 5.3,which shows a linear demand curve.Between points B and C,the demand is _____

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

Question 69

Exhibit 5.3

Refer to Exhibit 5.3,which shows a linear demand curve.Between points A and B,the elasticity of demand is ____ and demand is _____

A)1; unit elastic.
B)1.89; elastic.
C)0.2; inelastic.
D)infinity; perfectly elastic.
E)1; perfectly inelastic.

Question 70

Exhibit 5.3

Refer to Exhibit 5.3,which shows a linear demand curve.Between points C and D,the demand is _____

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

Question 71

Exhibit 5.3

Refer to Exhibit 5.3,which shows a linear demand curve.Between points B and C,the elasticity of demand is ____ and demand is _____.

A)1; unit elastic
B)1.89; elastic
C)0.73; inelastic
D)infinity; perfectly elastic
E)1; perfectly inelastic

Question 72

What is the effect of a 10 percent price increase on total revenue if elasticity is larger than zero but less than 1?

A)Revenue increases by 10 percent.
B)Revenue increases by less than 10 percent.
C)Revenue does not change.
D)Revenue decreases.
E)Revenue drops to 0.

Question 73

Exhibit 5.5

Refer to Exhibit 5.5,which shows the total revenue curve for a firm.Which of the following statements is true in the range of the total revenue curve labeled A?

A)Demand is elastic.
B)Demand is inelastic.
C)Demand is unit elastic.
D)Demand is perfectly inelastic.
E)Demand is perfectly elastic.

Question 74

Exhibit 5.4

Refer to Exhibit 5.4,which shows a downward-sloping linear demand curve.Between points b and c price decreases by $1,quantity demanded increases by 10 units,_____

A)total revenue decreases by $1, and demand is elastic.
B)total revenue decreases by $1, and demand is inelastic.
C)total revenue increases by $40, and demand is elastic.
D)total revenue increases by $40, and demand is inelastic.
E)and total revenue increases by $80.

Question 75

Exhibit 5.3

Refer to Exhibit 5.3,which shows a linear demand curve.Between points C and D,the elasticity of demand is ____ and demand is _____.

A)1; unit elastic
B)1.89; elastic
C)0.2; inelastic
D)infinity; perfectly elastic
E)1; perfectly inelastic

Question 76

Exhibit 5.5

Refer to Exhibit 5.5,which shows the total revenue curve for a firm.Which of the following is not true in the range of the total revenue curve labeled A?

A)Demand is inelastic.
B)Total revenue is increasing.
C)Total revenue is positive.
D)Demand is elastic.
E)Demand elasticity decreases as total revenue decreases.

Question 77

What is the effect of a 10 percent price increase on total revenue if elasticity is zero?

A)Revenue increases by 10 percent.
B)Revenue increases by less than 10 percent.
C)Revenue does not change.
D)Revenue decreases.
E)Revenue drops to 0.

Question 78

Exhibit 5.5

Refer to Exhibit 5.5,which shows the total revenue curve for a firm.Which of the following statements is true in the range of the total revenue curve labeled B?

A)Demand is elastic.
B)Demand is inelastic.
C)Demand is unit elastic.
D)Demand is perfectly inelastic.
E)Demand is perfectly elastic.

Question 79

Exhibit 5.4

Refer to Exhibit 5.4,which shows a downward-sloping linear demand curve.Which of the following is true between points g and h?

A)Total revenue remains constant at $180.
B)Total revenue falls by $12.
C)Total revenue falls by $60.
D)Total revenue falls by $180.
E)Total revenue increases by $300.

Question 80

The total revenue curve that corresponds to a downward-sloping linear demand curve _____

A)slopes downward.
B)slopes upward.
C)is a horizontal line.
D)first rises, then falls.
E)first falls, then rises.