Deck 6: Demand and Supply Elasticity

Question 1

The formal definition of price elasticity of demand is

A)change in quantity demanded divided by change in price.
B)quantity demanded divided by price.
C)percentage change in quantity demanded divided by percentage change in price.
D)quantity demanded multiplied by price and divided by 100.

Answer 1

percentage change in quantity demanded divided by percentage change in price.

Question 2

Suppose that when the price of milk rises 20%,the quantity demanded of milk falls 10%.Based on this information,what is the approximate absolute price elasticity of demand for milk?

A)0.05
B)0.2
C)0.5
D)2.0

Answer 2

0.5

Question 3

The price elasticity of demand is

A)always positive,so there is no reason to consider the absolute value of the price elasticity of demand.
B)always negative,but by convention,economists typically express the price elasticity of demand as an absolute value.
C)always equal to -1,which by convention economists typically express as an absolute value,or 1.
D)always equal to zero,so there is no reason to consider the absolute value of the price elasticity of demand.

Answer 3

always negative,but by convention,economists typically express the price elasticity of demand as an absolute value.

Question 4

The price elasticity of demand is a measure of

A)the responsiveness of the quantity demanded of a good to a changes in the price of the good.
B)the quantity demanded of a good at a given price.
C)the demand for a product holding prices constant.
D)the horizontal shift in the demand curve when the price of a good changes.

Question 5

The price elasticity of demand shows

A)the relationship between market price and household income.
B)the proportionate amount by which the quantity demanded changes in response to a proportionate change in price.
C)the quantity demanded at a given price.
D)the proportionate amount by which the price changes in response to a proportionate change in quantity demanded.

Question 6

When the price of a soft drink from the campus vending machine was $0.60 per can,100 cans were sold each day.After the price increased to $0.75 per can,sales dropped to 85 cans per day.Over this range,the absolute price elasticity of demand for soft drinks was approximately equal to

A)0.15.
B)0.60.
C)0.73.
D)1.67.

Question 7

When economists want to obtain a measure of the responsiveness of quantity demanded to changes in price,they use

A)the slope of the demand curve.
B)the price elasticity of demand.
C)only the percentage change in quantity demanded.
D)the cross-price elasticity of demand.

Question 8

An absolute price elasticity of demand equal to 0.4 indicates that a

A)4 percent increase in price leads to a 10 percent decrease in quantity demanded.
B)1 percent increase in price leads to a 4 percent decrease in quantity demanded.
C)0.4 percent decrease in price leads to a 1 percent increase in quantity demanded.
D)10 percent decrease in price leads to a 4 percent increase in quantity demanded.

Question 9

The local baseball stadium's concession stands previously sold hot dogs for 80 cents apiece.At that price,when a baseball fan went to watch a baseball game,he bought 2 hotdogs.But now that the stadium has a "dime-a-dog night," he has purchased 6 hot dogs.What is the approximate value of this individual's absolute price elasticity of demand for hot dogs?

A)0.64
B)0.80
C)1.00
D)1.56

Question 10

Six months ago,the price of gasoline was $2.20 per gallon.Now,the price is $2.40 per gallon.In response to this price increase,the number of gallons of gasoline purchased has declined by 2 percent.Based on this information,what is the absolute price elasticity of demand for gasoline?

A)4.35
B)1.20
C)0.23
D)0.10

Question 11

If price decreases by 10 percent and quantity demanded increases by 30 percent,the price elasticity of demand will be

A)0.333.
B)3.
C)30.
D)300.

Question 12

If the absolute price elasticity of demand for good Y is 0.75,when there is a 30 percent increase in price,we can conclude that quantity demanded

A)has fallen by 35.0 percent.
B)has fallen by 10.4 percent.
C)has fallen by 22.5 percent.
D)has fallen by 40.0 percent.

Question 13

Even though price elasticity of demand is always ________,by convention its absolute value is always discussed as a ________.

A)negative; prime number
B)positive; negative number
C)a fraction; whole number
D)negative; positive number

Question 14

If the price elasticity of demand for good A is -1,then a 1% increase in

A)consumer income will result in a 1% decrease in the demand for good A.
B)consumer income will result in a 1% increase in the demand for good A.
C)the market price of good A will result in a 1% increase in the quantity demanded of good A .
D)the market price of good A will result in a 1% decrease in the quantity demanded of good A .

Question 15

If the absolute price elasticity of demand is 2.0,a 5 percent decrease in price will increase quantity demanded by

A)10 percent.
B)20 percent.
C)25 percent.
D)5 percent.

Question 16

Suppose the quantity demanded of ice cream cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25.In this situation,the elasticity of demand,calculated using the average method,is

A)3.
B)1.
C)0.33.
D)1.33.

Question 17

A good's price elasticity of demand can be calculated by using the formula of

A)percentage change in price divided by percentage change in quantity demanded.
B)percentage change in quantity demanded divided by percentage change in price.
C)percentage change in price divided by percentage change in income.
D)absolute change in quantity demanded divided by absolute change in price.

Question 18

A 2 percent rise in the price of a good leads to a 2 percent decrease in quantity demanded.The absolute price elasticity of demand is

A)5.
B)10.
C)0.1.
D)1.0.

Question 19

Which of the following statements about demand and price elasticity of demand is TRUE?

A)As the demand curve has a positive slope,the price elasticity of demand is positive.
B)As the demand curve has a negative slope,the price elasticity of demand is negative.
C)As the demand curve has a positive slope,the price elasticity of demand is negative.
D)As the demand curve has a negative slope,the price elasticity of demand is positive.

Question 20

The price elasticity of demand measures

A)the consumers' sensitivity to a price change.
B)the producers' sensitivity to a price change.
C)how much the market price changes in response to a change in demand.
D)how much the demand changes in response to a change in income.

Question 21

A 3 percent increase in the price of cotton leads to a 6 percent decrease in the quantity demanded of cotton.The absolute price elasticity of demand is

A)3.
B)2.
C)0.5.
D)0.33.

Question 22

The value of the absolute price elasticity of demand for good X is 4.The absolute price elasticity for good Y is 1.Which good's quantity demanded is more responsive to a change in price?

A)Good X.
B)Good Y.
C)They are equally responsive.
D)Not enough information is given.

Question 23

A value of the absolute price elasticity of demand equal to 2.5 indicates that

A)a 5% decrease in price leads to a 2% increase in quantity demanded.
B)a 2% decrease in price leads to a 25% increase in quantity demanded.
C)a 1% decrease in price leads to a 2.5% increase in quantity demanded.
D)a 0.25% decrease in price leads to a 1% increase in quantity.

Question 24

A value of the absolute price elasticity of demand equal to 0.5 indicates that

A)a 0.5% decrease in price leads to a 1% increase in quantity demanded.
B)a 2% decrease in price leads to a 25% increase in quantity demanded.
C)a 1% increase in price leads to a 5% decrease in quantity demanded.
D)a 1% increase in price leads to a 0.5% decrease in quantity demanded.

Question 25

The actual value of the price elasticity of demand is always

A)positive because of the law of demand.
B)negative because of the law of demand.
C)positive because of diminishing marginal utility.
D)negative because percentages can only be negative.

Question 26

$$\begin{array} { c c } \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 5.5 & 20 \\\$ 6.0 & 18 \\\$ 6.5 & 16 \\\$ 7.0 & 14 \\\$ 7.5 & 12 \\\$ 8.0 & 10\end{array}$$

-According to the above table,what is the absolute price elasticity of demand if price falls from $8.00 to $7.50?

A)4.00
B)2.82
C)1.80
D)1.21

Question 27

The responsiveness of quantity demanded of a good to changes in its price is the

A)cross elasticity of demand.
B)price elasticity of supply.
C)income elasticity.
D)price elasticity of demand.

Question 28

The price elasticity of demand measures

A)the responsiveness of quantity demanded to a change in price.
B)the responsiveness of price to a change in competition.
C)the change in quantity demanded due to a change in price of a substitute good.
D)the change in price due to a change in demand.

Question 29

$$\begin{array} { c c } \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 5.5 & 20 \\\$ 6.0 & 18 \\\$ 6.5 & 16 \\\$ 7.0 & 14 \\\$ 7.5 & 12 \\\$ 8.0 & 10\end{array}$$

-According to the above table,what is the absolute price elasticity of demand when price rises from $5.50 to $6?

A)4.00
B)2.23
C)1.21
D)0.50

Question 30

A 2 percent increase in the price of neckties leads to a 5 percent decrease in the quantity demanded of neckties.The absolute price elasticity of demand is

A)2.5.
B)1.
C)0.4.
D)0.2.

Question 31

The quantity of raspberries sold at a local store increases from 100 pints to 1,500 pints when the price is reduced from $4.00 to $1.00.In this situation,the absolute price elasticity of demand for raspberries is approximately

A)0.69.
B)6.7.
C)1.46.
D)4.3.

Question 32

Suppose that the price of eggs increases from 75 cents to $1.00 per dozen and as a result a typical farmer experiences a decrease in egg sales from 300 to 200 dozen per week.Using the method of average values,the absolute price elasticity of demand is

A)1.4.
B)0.8.
C)3.0.
D)1.75.

Question 33

The price elasticity of demand is measured by the

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

Question 34

If the price of good A increases from $15 to $20 per unit and quantity demanded falls from 1500 to 1000 units,then by using the method of average values,we can calculate the absolute price elasticity of demand to be

A)2.6.
B)0.75.
C)1.4.
D)2.4.

Question 35

A value of the absolute price elasticity of demand equal to 0.6 indicates that

A)a 6 percent increase in price leads to a 10 percent decrease in quantity demanded.
B)a 10 percent increase in price leads to a 6 percent decrease in quantity demanded.
C)a 0.6 percent increase in price leads to a 1 percent decrease in quantity demanded.
D)a 1 percent increase in price leads to a 6 percent decrease in quantity demanded.

Question 36

A 10 percent increase in the price of neckties leads to a 5 percent decrease in the quantity demanded of neckties.The absolute price elasticity of demand is

A)3.
B)0.33.
C)0.5.
D)2.

Question 37

The word best associated with price elasticity of demand is

A)relative.
B)total.
C)absolute.
D)cumulative.

Question 38

When price is $5 per unit,quantity demanded is 12 units.When price is $6 per unit,quantity demanded is 8 units.The value of the absolute price elasticity of demand is approximately

A)2.20.
B)4.00.
C)1.82.
D)0.36.

Question 39

Absolute price elasticities are calculated for four commodities,and the values are: 0.009; 1.0; 3.3; and 4.1.Which indicates the most price-responsive situation?

A)0.009
B)1.0
C)3.3
D)4.1

Question 40

A 10 percent increase in the price of smartphones leads to a 10 percent decrease in the quantity demanded of smartphones.The absolute price elasticity of demand is

A)3.
B)0.3.
C)1.0.
D)0.01.

Question 41

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.What is the absolute price elasticity of demand when a price rises from $9 to $9.50?

A)0.35
B)0.55
C)2.57
D)2.85

Question 42

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?

A)1.60
B)1.00
C)0.65
D)0.60

Question 43

The value of the absolute price elasticity of demand for good X is 3.The absolute price elasticity for good Y is 2.Which good's quantity demanded is less responsive to a change in price?

A)Good X.
B)Good Y.
C)They are equally responsive.
D)Not enough information is given.

Question 44

The price elasticity of demand can be computed as

A)change in total utility/change in quantity.
B)change in price/change in quantity demanded.
C)percentage change in quantity demanded/percentage change in price.
D)change in quantity demanded/change in price.

Question 45

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.Demand is least price elastic at a price of

A)$10.00.
B)$7.50.
C)$7.00.
D)$5.00.

Question 46

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

A)0.72
B)0.79
C)1.38
D)5.0

Question 47

The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars.If price were measured in cents,the price elasticity elasticity of demand would equal

A)1200
B)12
C)1.2
D)0.012

Question 48

The less sensitive quantity demanded is to a change in price,the

A)smaller a change in price must be to induce a certain change in quantity demanded.
B)greater the absolute price elasticity of demand.
C)smaller the absolute price elasticity of demand.
D)closer the absolute price elasticity of demand is to one.

Question 49

The actual value of price elasticity of demand

A)measures the relative change in quantity demanded when there is a change in price.
B)will change when the units good is measured in changes.
C)varies with changes in supply.
D)is always negative.

Question 50

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

A)0.85
B)1.08
C)1.17
D)0.92

Question 51

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.Demand is unit elastic between the prices of

A)$5.00 & $10.00.
B)$6.00 & $7.00.
C)$6.00 & $6.50.
D)$7.00 & $7.50

Question 52

Relative percentage changes are used in measuring price elasticity of demand,so that

A)it does not matter whether price increases or decreases when calculating the elasticity.
B)it does not matter what units are used to measure prices or quantities.
C)we always obtain a positive number.
D)larger numbers indicate greater responsiveness.

Question 53

Price elasticity of demand basically measures

A)the reliability of a product.
B)the responsiveness of consumers to price changes.
C)the variability of price changes.
D)the percentage change in market price as a result of a change in demand.

Question 54

Price elasticity of demand is the responsiveness of

A)the quantity demanded to a change in price.
B)demand to a change in supply.
C)demand to a change in income.
D)demand for a good to a change in the demand for another good.

Question 55

Wheat is sold in world markets,usually priced in terms of bushels.In the market for wheat,the price elasticity of demand for wheat would be expressed as

A)the number of bushels of wheat sold.
B)the number of whatever currency is used in purchasing the wheat.
C)the number of dollars spent on wheat.
D)a unitless number.

Question 56

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.What is the absolute price elasticity of demand if a price falls from $7.50 to $7?

A)10
B)1.38
C)0.724
D)0.1

Question 57

The price elasticity of demand is the

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

Question 58

If the price of gasoline increased by 5 % and consumers responded by purchasing 1 % less gasoline,the absolute value of price elasticity of demand for gasoline would equal

A)0.1.
B)0.5.
C)1.5.
D)0.2.

Question 59

The result of the calculation of the price elasticity of demand is

A)always positive.
B)always negative.
C)sometimes positive,sometimes negative.
D)always greater than one.

Question 60

$$\begin{array} { c c } \hline \begin{array} { c } \text { Price } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { Per Week }\end{array} \\\hline \$ 10.00 & 25 \\9.50 & 30 \\9.00 & 35 \\8.50 & 40 \\8.00 & 45 \\7.50 & 50 \\7.00 & 55 \\6.50 & 60 \\6.00 & 65 \\5.50 & 70 \\5.00 & 75\end{array}$$

-Refer to the above table.What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

A)5.15
B)1.94
C)0.515
D)0.194

Question 61

If the absolute price elasticity of demand for a product is greater than 1,then

A)consumers are relatively insensitive to price changes.
B)consumers are relatively sensitive to price changes.
C)there is a positive relationship between price changes and total revenue.
D)producers are relatively insensitive to price changes.

Question 62

The price elasticity of demand is

A)always negative.
B)sometimes positive.
C)always positive.
D)constant along the demand curve.

Question 63

If the price of a cola increased by 12 % and consumers responded by purchasing 20 % less cola,the absolute value of price elasticity of demand for cola would be

A)0.20.
B)0.80.
C)1.67.
D)1.80.

Question 64

Price elasticity of demand is measured using percentage changes.Why?

Question 65

Consider the following data:
Price of A Quantity Demanded of A
$5 6
$4 10
The absolute value of the price elasticity of demand for product A is

A)0.44.
B)1.80.
C)0.56.
D)2.25.

Question 66

What is the price elasticity of demand? How is the price elasticity of demand calculated?

Question 67

If the absolute price elasticity of demand is 0.2,a 10 percent increase in the price will cause

A)the quantity demanded to decrease by 2 percent.
B)the quantity demanded to decrease by 20 percent.
C)the quantity demanded to decrease by 5 percent.
D)the quantity demanded to decrease by 0.2 percent.

Question 68

If the absolute value of the price elasticity of demand for a product is 1.5,and the price of a product increased 30 percent,then the quantity demanded will decline by

A)45 percent.
B)20 percent.
C)5 percent.
D)10 percent.

Question 69

Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20.When they price donuts at $1,they sell 170 donuts.The absolute value of the price elasticity of demand for donuts is

A)0.69.
B)1.45.
C)1.00.
D)infinity.

Question 70

"Price elasticity measures how many more units of a good that consumers will buy given a decrease in price." Do you agree or disagree? Explain.

Question 71

If the absolute price elasticity of demand for a product is less than 1,then

A)consumers are relatively insensitive to price changes.
B)consumers are relatively sensitive to price changes.
C)there is a positive relationship between price changes and total revenue.
D)producers are relatively insensitive to price changes.

Question 72

"The slope of the demand curve gives the elasticity of demand." Do you agree or disagree? Why?

Question 73

When discussing the price elasticity of demand we generally refer to the absolute price elasticity of demand by consumers.This means that we will

A)disregard the law of demand.
B)ignore its relationship to demand.
C)disregard the minus sign.
D)consider absolute rather than relative changes.

Question 74

If the price of corn chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week,the absolute value of price elasticity of demand in that price range is

A)0.50.
B)1.67.
C)0.93.
D)2.33.

Question 75

If the absolute price elasticity of demand is 2,a 10 percent increase in the price will cause

A)the quantity demanded to decrease by 2 percent.
B)the quantity demanded to decrease by 20 percent.
C)the quantity demanded to decrease by 5 percent.
D)the quantity demanded to decrease by 0.2 percent.

Question 76

The greater is the absolute price elasticity of demand,the

A)larger is the responsiveness of quantity demanded to the price change.
B)smaller is the responsiveness to a price change.
C)larger is the income of the buyer.
D)higher is the change in demand to an income change.

Question 77

The price elasticity of demand measures

A)changes in demand.
B)how responsive producers are to a change in demand.
C)how responsive consumers are to a change in price.
D)how responsive consumers are to a change in income.

Question 78

If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week,the absolute value of price elasticity of demand in that price range is approximately

A)0.23.
B)4.35.
C)0.93.
D)2.34.

Question 79

If the price of oil goes up by 50 % and the quantity demanded goes down by 25%,the absolute value of the price elasticity of demand is

A)0.25.
B)0.50.
C)0.75.
D)1.00.

Question 80

At a price of $10,quantity demanded is 30 units.When the price rises to $11,quantity demanded is 24 units.What is the absolute price elasticity of demand?

A)0.5
B)0.43
C)2.33
D)6.0