Deck 18: The Price Elasticities of Demand and Supply

Question 1

If price rises from $2 to $3 and the quantity demanded falls from 100 to 99,demand would be

A)0.03
B)0.67
C)1.23
D)5.81

Answer 1

A

Question 2

Which statement is true?

A)A perfectly elastic demand curve has an elasticity of zero.
B)Elasticity measures the change in quantity demanded in response to a change in price.
C)Elasticity of demand is found by dividing the percentage change in price by the percentage change in quantity.
D)None of these statements are true.

Answer 2

B

Question 3

An elasticity of 2 would be considered

A)elastic.
B)inelastic.
C)unit elastiC.
D)undefineD.

Answer 3

A

Question 4

If price falls from $100 to $99 and quantity demanded rises from 2 to 3,the demand is

A)0.03
B)1.75
C)25.7
D)39.8

Question 5

Assume that demand is elastic.Of the elasticities shown here,which is the lowest that would still be considered elastic?

A)10.0
B)1.01
C)1.00
D)0.01

Question 6

An elasticity of 0.75 means that a 1% change in price will lead to a _____% change in quantity demanded.

A)0.25
B)0.75
C)2.5
D)7.5

Question 7

If demand is elastic and price is raised,total revenue will

A)rise.
B)fall.
C)stay the same.
D)possibly rise or possibly fall.

Question 8

A demand curve that is perfectly horizontal is

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

Question 9

If demand is inelastic and price is lowered,total revenue will

A)rise.
B)fall.
C)stay the same.
D)possibly rise or possibly fall.

Question 10

When the price of CD players increases 5%,quantity demanded decreases 5%.The price elasticity for CD players is

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

Question 11

The lowest possible elasticity shown here is

A)10.
B)1.0.
C)0.1.
D)0.01.
E)0.001.

Question 12

The curve in the above graph

A)is a perfectly elastic demand curve.
B)is a perfectly inelastic demand curve.
C)is a very elastic demand curve.
D)is a very inelastic demand curve.

Question 13

Which statement is false?

A)The most important determinant of the degree of elasticity is the availability of substitutes.
B)An elasticity of less than 1 is inelastic.
C)The advertiser wants to push her product's curve to the left and make is less elastiC.
D)None of these statements are false.

Question 14

If demand is inelastic and price is raised

A)quantity demanded will fall and total revenue will fall.
B)quantity demanded will fall and total revenue will rise.
C)quantity demanded will rise and total revenue will rise.
D)quantity demanded will rise and total revenue will fall.

Question 15

In the above graph,unit elasticity would occur at approximately point ____.

A)A
B)B
C)C
D)D
E)E

Question 16

When elasticity is 0.1,demand is

A)elastic.
B)inelastic.
C)unit elastiC.
D)undefineD.

Question 17

The lowest elasticity in the above graph would be at point ____.

A)A
B)B
C)C
D)D
E)E

Question 18

If a car dealership decides to offer a rebate to reduce the selling price of its cars and as a result finds an increase in its total revenues,then the demand for cars from this dealership is

A)price elastic.
B)price inelastic.
C)rebate inelastiC.
D)unit elastic.
E)unknown.

Question 19

If a 1% change in price leads to a 0.5% change in quantity demanded,then elasticity of demand is

A)0.5.
B)1.0.
C)1.5.
D)5.

Question 20

If demand is elastic and price is lowered,total revenue will

A)rise.
B)fall.
C)stay the same.
D)possibly rise and possibly fall.

Question 21

Total revenue will increase if price

A)rises and demand is elastic.
B)rises and demand is unit elastic.
C)falls and demand is inelastiC.
D)falls and demand is elastic.

Question 22

A firm that changes its price and sees no change in the total revenues it receives is facing demand that is

A)price inelastic.
B)revenue inelastic.
C)unit elastiC.
D)price elastic.

Question 23

Income elasticity of demand measures how ___________________.

A)responsive the quantity of one good demanded to a change in the price of another good
B)the consumption of various goods and services respond to change in income
C)the quantity demanded responds to a change in price
D)responsive the quantity supplied is to a change in price

Question 24

The elasticity of demand for fish is estimated to be 3.If this estimate is accurate,then a 3% rise in price will

A)increase quantity demanded by 1%.
B)increase quantity demanded by 9%.
C)decrease quantity demanded by 1%.
D)decrease quantity demanded by 3%.
E)decrease quantity demanded by 9%.

Question 25

In general,the fewer the substitutes available for a good

A)the more inelastic the demand for the good.
B)the more elastic the demand for the good.
C)the greater the demand for the good.
D)the less the demand for the gooD.

Question 26

A car dealership estimates that the elasticity of demand for its top models is 0.5.If it raises its prices by 10%,

A)quantity demanded will decrease by 5% and total revenue will increase.
B)there will be no change in either quantity demanded or total revenue because demand is inelastic.
C)quantity demanded will decrease by 5% and total revenue will decrease.
D)quantity demanded will decrease by 10% and total revenue will increase.

Question 27

The elasticity closest to unit elastic would be

A)0.
B)0.2.
C)1.4.
D)5.
E)10.

Question 28

In general,the more the substitutes available for a good

A)the more inelastic the demand for the good.
B)the more elastic the demand for the good.
C)the greater the demand for the good.
D)the less the demand for the gooD.

Question 29

The elasticity all along a downward-sloping straight-line demand curve,

A)will be equal to -1 at all points.
B)will be different at each point on the curve.
C)will be equal to zero at all points.
D)will be constant.

Question 30

Which statement is true?

A)Over time demand tends to become less elastic.
B)The demand for cigarettes is very elastic.
C)Advertisers try to make the demand for their products less elastiC.
D)None of these statements are true.

Question 31

An elasticity of 1.5 means that a 1% change in price will lead to a _____% change in quantity demanded.

A)0.5
B)1.0
C)1.5
D)3.0
E)15

Question 32

If the elasticity of demand for a service is 0.4 and price is raised,

A)total revenue will fall.
B)total revenue will rise.
C)total revenue will stay the same.
D)there is no way to determine whether total revenue will rise,fall,or remain the same.

Question 33

A perfectly inelastic demand curve is

A)a vertical line.
B)a horizontal line.
C)a line that slopes downward to the right.
D)a line that slopes upward to the right.

Question 34

Movement from the lower to the upper range of a downward-sloping straight-line demand curve indicates that demand is becoming

A)easier to estimate.
B)more inelastic.
C)harder to estimate.
D)more elastic.

Question 35

Cross elasticity of demand measures the response in

A)the quantity of one good demanded to a change in the price of another good.
B)the income of consumers to the change in the price of goods.
C)the price of a good to a change in the quantity of another good demanded.
D)quantity of one good demanded when the quantity demanded of another good changes.

Question 36

If more substitutes become available demand tends to become ____ elastic,and over time demand tends to become ____ elastic.

A)more;more
B)less;less
C)more;less
D)less;more

Question 37

Which of these elasticities is the least elastic?

A)1
B)10
C)100
D)0.9
E)0.1

Question 38

If consumers are price sensitive,then

A)they will have elastic demand curves.
B)they will have inelastic demand curves.
C)they will have no demand curve.
D)they will not shop around very much.
E)they likely perceive no close substitutes.

Question 39

If elasticity of demand is 4 and price is raised,

A)total revenue will fall.
B)total revenue will rise.
C)total revenue will remain constant.
D)there is no way to determine whether total revenue will rise,fall,or remain constant.

Question 40

Which statement is true?

A)D1 is more elastic than D2.
B)D2 is more elastic than D1.
C)D1 and D2 have the same elasticity.
D)There is no way to determine the relative elasticities of D1 and D2.

Question 41

Which is NOT a determinant of the elasticity of demand?

A)The proportion of income consumers spend on the good
B)The number of sellers
C)The availability of substitutes
D)Time

Question 42

When the cross elasticity of demand for two services is positive,then these services are _________.

A)complements
B)substitutes
C)both complements and substitutes
D)neither complements nor substitutes

Question 43

If the demand for table salt were perfectly inelastic at all prices,a decrease in supply would

A)increase the price and decrease the quantity demanded.
B)increase the price while not affecting the quantity demanded.
C)reduce the quantity demanded to zero no matter what the initial price.
D)have no effect on either price or quantity demandeD.

Question 44

If you buy 10% more compact discs in response to a 20% increase in income,your income elasticity for compact discs is _____.

A)0.5
B)1.0
C)2.0
D)0.0

Question 45

If a decrease in price leads to a decrease in total revenue,

A)demand is elastic.
B)demand is inelastic.
C)demand is unit elastiC.
D)there is not enough information to determine the elasticity of demanD.

Question 46

Which of these has the least elastic demand?

A)Chicken
B)Insulin (diabetes medicine)
C)Levi's jeans
D)Honda Civics

Question 47

Along a downward-sloping straight-line demand curve,

A)demand is perfectly elastic when price is zero.
B)demand is unit elastic at all prices.
C)demand is very inelastic at high prices but becomes more elastic as price decreases.
D)demand is very elastic at high prices but becomes less elastic as price decreases.

Question 48

The demand for items on which we spend a large percentage of our income

A)will be perfectly inelastic.
B)will tend to be elastic.
C)will tend to be inelastiC.
D)will be perfectly elastic.

Question 49

If demand is unit elastic a small increase in price will

A)raise total revenue.
B)lower total revenue.
C)not change total revenue.

Question 50

If income elasticity for a good or service is _____,then we can say that the good or service is _____.

A)zero;inferior
B)negative;normal
C)positive;inferior
D)positive;normal

Question 51

When the cross elasticity of demand is ________,the goods or services are ________.

A)zero;substitutes
B)negative;substitutes
C)positive;complements
D)positive;substitutes

Question 52

Cross elasticity is defined as the _______________.

A)percentage change in price of a one good (A),divided by the percentage change in the quantity demanded of a related good (B)
B)percentage change in quantity demanded for one good (A),divided by the percentage change in the price of a related good (B)
C)percentage change in quantity demanded for one good (A),divided by the percentage change in the price of that good (A)
D)change in quantity demanded for one good (A),divided by the change in the price of a related good (B)

Question 53

When two goods are complementary goods,as the price of one of the goods goes _____,the quantity demanded of the other goes _____.

A)down;down
B)up;up
C)up;down
D)down;neither up nor down

Question 54

Demand is inelastic if

A)the percentage change in quantity is greater than the percentage change in price.
B)the elasticity of demand is less than 1.
C)the demand for the good is sensitive to changes in price.
D)more units will be purchased if the price increases.

Question 55

If income elasticity for a good or service is ______,then we can say that the good or service is _____.

A)negative;inferior
B)negative;normal
C)positive;inferior
D)zero;normal

Question 56

Which of these has the most elastic demand?

A)Filet Mignon steak
B)Bread
C)Heart medicine
D)Insulin (diabetes medicine)

Question 57

A perfectly elastic demand curve is

A)horizontal.
B)vertical.
C)upward sloping.
D)downward sloping.

Question 58

Since the cross elasticity of demand between hamburger patties and cheese is negative,these are ________ goods.

A)complementary
B)substitutable
C)normal
D)both complementary and substitutable

Question 59

If the income elasticity for Ramen Noodles is -3.0,we may conclude that Ramen Noodles are _________.

A)a normal good
B)an inferior good
C)both a normal good and an inferior good
D)neither a normal good nor an inferior good

Question 60

If an increase in price leads to a decrease in total revenue,

A)demand is elastic.
B)demand is inelastic.
C)demand is unit elastiC.
D)there is not enough information to determine the elasticity of demanD.

Question 61

Which statement is most likely true about the demand curve in the graph?

A)Point R is unit elastic,while point S is very inelastic.
B)Point T is very inelastic,while point Q is very elastic.
C)Point Q is very inelastic,while point T is very elastiC.
D)Point Q is slightly elastic,while point S is very inelastic.

Question 62

What is the key difference between the short-run and long-run in terms of elasticity of supply?

A)Fixed productive capacity
B)Labor changes
C)No changes can be made to capital or labor
D)No difference

Question 63

If the elasticity of demand for a service is 1,then the demand for that service is

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

Question 64

If elasticity of demand is 0.1,a 1% increase in price will lower quantity demanded by

A)0.01%.
B)0.1%.
C)1.0%.
D)10%.
E)100%.

Question 65

The __________ is the time immediately after a change in market price when sellers cannot respond by changing quantity supplied.

A)market period
B)short-run
C)long-run

Question 66

If elasticity of demand is 10,a 1% increase in price will lower quantity demanded by

A).1%.
B)1%.
C)10%.
D)100%.

Question 67

An elasticity of demand that would be considered very inelastic would be

A)0.1.
B)0.9.
C)1.0.
D)1.1.

Question 68

Demand is inelastic when

A)the percentage change in quantity is greater than percentage change in price.
B)the percentage change in price is greater than percentage change in quantity.
C)the percentage change in price is equal to percentage change in quantity.

Question 69

An elasticity of 1 would be considered

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

Question 70

Among teenagers,the average demand for cigarettes is _________,ranging from 0.76 and 1.20.

A)highly inelastic
B)approximately unit elastic
C)highly elastic

Question 71

If demand is elastic,then the elasticity of demand is

A)zero.
B)between zero and 1.
C)1.
D)more than 1.

Question 72

A sharp increase in the price of gasoline

A)will reduce daily gas consumption by more tomorrow than it will six months from now.
B)will reduce gasoline consumption more six months from now than it will tomorrow.
C)will cause an increase in quantity of gasoline demanded if demand is perfectly inelastiC.
D)will cause an increase in the quantity of gasoline demanded if demand is perfectly elastic.

Question 73

Statement I: Over time the demand for most goods becomes more elastic.
Statement II: The more uses a product has,the less elastic its demand.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 74

In the demand curve shown in the above graph we are closest to unit elasticity at point

A)point Q.
B)point R.
C)point S.
D)point T.

Question 75

If the price elasticity of demand is zero for all prices,the demand curve is

A)horizontal.
B)vertical.
C)neither horizontal nor vertical.

Question 76

Which statement is true?

A)A vertical demand curve has zero elasticity.
B)A horizontal demand curve has zero elasticity.
C)Both vertical and horizontal demand curves have zero elasticity.
D)Neither vertical nor horizontal demand curves have zero elasticity.

Question 77

Which statement is true about the demand curve in the graph?

A)Demand is perfectly elastic.
B)Demand is perfectly inelastic.
C)Demand is more elastic at point Q than at point T.
D)Demand is more elastic at point T than at point Q.

Question 78

When the demand elasticity of a service is ____,a small increase in price will lead to a decline of the same percentage in quantity.

A)10
B)1.0
C)0.0
D)0.1

Question 79

If a 1% change in price leads to a 2% change in quantity demanded,then the elasticity of demand is

A)0.5.
B)1.0.
C)1.5.
D)2.0.

Question 80

If the elasticity of demand for a good is 0.2,then the demand for that good is

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