Question 1

When the price elasticity of demand is 2 and the price increases by 10 percent,the quantity demanded
A)decreases by 2 percent.
B)decreases by 20 percent.
C)decreases by 5 percent.
D)increases by 2 percent.
E)increases by 20 percent.

Accepted Answer

A price elasticity of demand of 2 means that a 10% increase in price will result in a 20% decrease in quantity demanded (elastic demand). Therefore, the correct choice is B - the quantity demanded will decrease by 20%.

Question 2

Which one of the following illustrates an inelastic demand?
A)A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.
B)A 10 percent rise in price leads to a 20 percent decrease in quantity demanded.
C)A price elasticity of demand equal to infinity.
D)A price elasticity of demand equal to 1.0.
E)A price elasticity of demand equal to 2.0.

Accepted Answer

Inelastic demand is characterized by a smaller percentage change in quantity demanded than the percentage change in price, which is exactly what is described in option A (a 10 percent rise in price leads to only a 5 percent decrease in quantity demanded).

Question 3

If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded,the price elasticity of demand is
A)0.8.
B)1.25.
C)8.
D)0.125.
E)80.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is (-8% / 10%) = -0.8. The negative sign indicates the inverse relationship between price and quantity demanded, but the magnitude (0.8) is what's typically reported for elasticity.

Question 4

The demand for good A is unit elastic if
A)a 5 percent fall in the price of A results in an infinite increase in the quantity of A demanded.
B)a 5 percent rise in the price of A results in a 10 percent decrease in the quantity of A demanded.
C)any increase in the price of A results in a 1 percent decrease in the quantity of A demanded.
D)a 5 percent rise in the price of A results in no change in the quantity of A demanded.
E)a 5 percent rise in the price of A results in a 5 percent decrease in the quantity of A demanded.

Accepted Answer

In a unit elastic demand, a percentage change in price will result in an equal percentage change in the quantity demanded. Therefore, a 5 percent rise in the price of A will result in a 5 percent decrease in the quantity of A demanded.

Question 5

If a large percentage drop in the price level results in a small percentage increase in the quantity demanded,
A)demand is inelastic.
B)demand is elastic.
C)demand is unit elastic.
D)the price elasticity of demand is close to infinity.
E)the price elasticity of demand is zero.

Accepted Answer

When a large percentage drop in the price level results in a small percentage increase in the quantity demanded, it indicates that demand is not very responsive to price changes. This means that demand is inelastic.

Question 6

If a 12 percent fall in price results in an 8 percent increase in quantity demanded,the price elasticity of demand equals
A)0.96.
B)0.12.
C)0.67.
D)1.5.
E)0.8.

Accepted Answer

Price elasticity of demand = percentage change in quantity demanded / percentage change in price
Here, we are given that when the price falls by 12%, the quantity demanded increases by 8%. Therefore, the percentage change in quantity demanded is 8% and the percentage change in price is -12%. 
Plugging these values in the formula, we get:
Price elasticity of demand = 8% / (-12%) = -0.67
However, we need a positive value for price elasticity of demand. So, taking the absolute value of -0.67, we get 0.67. Therefore, the price elasticity of demand equals 0.67.

Question 7

If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity demanded,the demand curve for this good
A)is vertical.
B)is horizontal.
C)has slope equal to -1.
D)is a straight line with slope equal to -10.
E)is downward sloping and bowed toward the origin.

Accepted Answer

The answer of If a 10 percent rise in the...

Question 8

If the demand curve for a good is a horizontal line,then the good has
A)zero income elasticity.
B)price elasticity of demand equal to zero.
C)a perfectly elastic demand.
D)a price elasticity of demand that is likely to rise in the short run.
E)a price elasticity of demand that is likely to fall in the short run.

Accepted Answer

A horizontal demand curve indicates a perfectly elastic demand, meaning that consumers are extremely sensitive to even small changes in price, and will completely stop buying the good if the price rises even slightly. This also means that the price elasticity of demand for this good is infinite (not zero).

Question 9

The price elasticity of demand is a units-free measure of the responsiveness of the ________ when all other influences on buying plans remain the same.
A)quantity demanded of a good to a change in the price of a substitute or complement
B)quantity demanded of a good to a change in income
C)quantity demanded of a good to a change in its price
D)price to a change in the quantity demanded of a good
E)quantity demanded of a good to a change in supply

Accepted Answer

Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price, while holding all other factors constant. Therefore, the correct answer is C.

Question 10

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the
A)cross elasticity of demand.
B)income elasticity of demand.
C)substitute elasticity of demand.
D)price elasticity of demand.
E)elasticity of supply.

Accepted Answer

Price elasticity of demand measures the percentage change in quantity demanded of a good in response to a percentage change in its price. It is a measure of how sensitive consumers are to changes in price for a particular good or service.

Question 11

The price of good A falls by 10 percent and quantity of good A demanded does not change.The demand for good A is
A)perfectly elastic.
B)inelastic.
C)perfectly inelastic.
D)elastic.
E)unit elastic.

Accepted Answer

When the price of good A falls by 10 percent and quantity demanded does not change, it means that the demand is perfectly inelastic. This is because a change in price has no effect on the quantity demanded.

Question 12

When the price of a box of cereal is $5,the quantity demanded is 800 boxes.When the price of a box of cereal is $7,the quantity demanded is 400 boxes.Calculate the price elasticity of demand when the price of a box of cereal is $6.
A)0.5
B)200
C)0.005
D)1.0
E)2.0

Accepted Answer

Using the formula for price elasticity of demand:
Elasticity = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)

First, we need to calculate the percentage change in quantity demanded:
(Q2 - Q1) / Q1 * 100
= (400 - 800) / 800 * 100
= -50%

Next, we need to calculate the percentage change in price:
(P2 - P1) / P1 * 100
= (7 - 5) / 5 * 100
= 40%

Now, we can calculate the price elasticity of demand when the price is $6:
Elasticity = -50% / 40%
= -1.25

Since the absolute value of elasticity is greater than 1, we know that the demand is elastic. Therefore, a small change in price will result in a relatively large change in quantity demanded.
The closest option is E, 2.0 because the absolute value of -1.25 is equivalent to 1.25 and 2.0 is the closest to 1.25 when rounded.

Question 13

The price of an apple falls by 5 percent and quantity of apples demanded increases by 6 percent.The demand for apples is
A)perfectly elastic.
B)unit elastic.
C)elastic.
D)perfectly inelastic.
E)inelastic.

Accepted Answer

The decrease in price leads to an increase in quantity demanded, indicating that the demand is responsive to price changes. The percent change in quantity demanded (6%) is greater than the percent change in price (5%), indicating that demand is elastic.

Question 14

When the price of gas is $1.00 a litre,the quantity demanded is 1,750 litres.When the price of gas is $2.00 a litre,the quantity demanded is 1,250 litres.Calculate the price elasticity of demand when the price is $1.50 a litre.
A)2.0
B)5.0
C)0.5
D)20
E)1.5

Accepted Answer

The price elasticity of demand (PED) is calculated using the formula: PED = (% change in quantity demanded) / (% change in price). From $1.00 to $2.00, the quantity demanded changes from 1,750 to 1,250, a decrease of 500 litres. The average quantity demanded is (1,750 + 1,250) / 2 = 1,500 litres, and the average price is ($1.00 + $2.00) / 2 = $1.50. The percent change in quantity demanded is (500 / 1,500) * 100 = 33.33%, and the percent change in price is (($2.00 - $1.00) / $1.50) * 100 = 66.67%. Therefore, PED = 33.33% / 66.67% = 0.5.

Question 15

The price of a plum falls by 8 percent and quantity of plums demanded increases by 4 percent.The demand for plums is
A)inelastic.
B)perfectly elastic.
C)perfectly inelastic.
D)elastic.
E)unit elastic.

Accepted Answer

The demand for plums is inelastic because the percentage change in quantity demanded (4%) is less than the percentage change in price (8%).

Question 16

Demand is inelastic if
A)a small change in price results in a large change in quantity demanded.
B)the quantity demanded is very responsive to a change in price.
C)the price elasticity of demand is 0.2.
D)the price does not change when supply increases.
E)a 10 percent change in price results in a 1 percent change in the quantity supplied.

Accepted Answer

Inelastic demand is characterized by a low price elasticity of demand, which is indicated by a numerical value less than one. A price elasticity of demand of 0.2 is very low, indicating that a change in price will result in only a small change in quantity demanded. Choices A, B, D, and E describe characteristics that are not related to inelastic demand.

Question 17

The price of a bus ride rises by 3 percent and quantity of oranges demanded decreases by 3 percent.The demand for bus rides is
A)inelastic.
B)elastic.
C)perfectly inelastic.
D)perfect elastic.
E)unit elastic.

Accepted Answer

The demand for bus rides is unit elastic because the percentage change in quantity demanded is equal to the percentage change in price, both being 3 percent.

Question 18

A unit elastic demand
A)means that the magnitude of the ratio of a change in quantity demanded to a change in price is equal to 1.
B)means that the magnitude of the ratio of a percentage change in quantity demanded to a percentage change in price is equal to 1.
C)means that the magnitude of the ratio of a change in price to a change in quantity demanded is equal to 1.
D)is illustrated by a horizontal demand curve.
E)is illustrated by a vertical demand curve.

Accepted Answer

A unit elastic demand means that a small percentage change in price will result in an equal percentage change in quantity demanded. This is illustrated by a demand curve that is neither perfectly elastic (horizontal) nor perfectly inelastic (vertical). Therefore, the correct choice is B - the magnitude of the ratio of a percentage change in quantity demanded to a percentage change in price is equal to 1.

Question 19

Which one of the following illustrates an elastic demand?
A)A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.
B)A 10 percent rise in price leads to a 20 percent decrease in quantity demanded.
C)A price elasticity of demand equal to 0.2.
D)A price elasticity of demand equal to 1.0.
E)A price elasticity of demand equal to zero.

Accepted Answer

An elastic demand is one in which a small change in price leads to a large change in quantity demanded. Option B illustrates this by showing that a 10 percent rise in price leads to a 20 percent decrease in quantity demanded, indicating a high degree of sensitivity to price changes. Options A, C, D, and E do not clearly demonstrate this level of elasticity.

Question 20

When the price of a pair of gloves is $21,the quantity demanded is 600 pairs.When the price of a pair of gloves is $15,the quantity demanded is 1,000 pairs.Calculate the price elasticity of demand when the price of a pair of gloves is $18.
A)1.5
B)0.67
C)66.7
D)0.015
E)1.0

Accepted Answer

The price elasticity of demand (PED) is calculated using the formula: PED = (% change in quantity demanded) / (% change in price). From $21 to $15, the price decreases by $6, and the quantity demanded increases from 600 to 1000 pairs, which is a change of 400 pairs. The average price is ($21 + $15) / 2 = $18, and the average quantity demanded is (600 + 1000) / 2 = 800 pairs. The % change in quantity demanded is (400 / 800) * 100 = 50%, and the % change in price is ($6 / $18) * 100 = 33.33%. Therefore, PED = 50% / 33.33% = 1.5.

Quiz 4: Elasticity

When the price elasticity of demand is 2 and the price increases by 10 percent,the quantity demanded

Which one of the following illustrates an inelastic demand?

If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded,the price elasticity of demand is

The demand for good A is unit elastic if

If a large percentage drop in the price level results in a small percentage increase in the quantity demanded,

If a 12 percent fall in price results in an 8 percent increase in quantity demanded,the price elasticity of demand equals

If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity demanded,the demand curve for this good

If the demand curve for a good is a horizontal line,then the good has

The price elasticity of demand is a units-free measure of the responsiveness of the ________ when all other influences on buying plans remain the same.

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the

The price of good A falls by 10 percent and quantity of good A demanded does not change.The demand for good A is

When the price of a box of cereal is $5,the quantity demanded is 800 boxes.When the price of a box of cereal is $7,the quantity demanded is 400 boxes.Calculate the price elasticity of demand when the price of a box of cereal is $6.

The price of an apple falls by 5 percent and quantity of apples demanded increases by 6 percent.The demand for apples is

When the price of gas is $1.00 a litre,the quantity demanded is 1,750 litres.When the price of gas is $2.00 a litre,the quantity demanded is 1,250 litres.Calculate the price elasticity of demand when the price is $1.50 a litre.

The price of a plum falls by 8 percent and quantity of plums demanded increases by 4 percent.The demand for plums is

Demand is inelastic if

The price of a bus ride rises by 3 percent and quantity of oranges demanded decreases by 3 percent.The demand for bus rides is

A unit elastic demand

Which one of the following illustrates an elastic demand?

When the price of a pair of gloves is $21,the quantity demanded is 600 pairs.When the price of a pair of gloves is $15,the quantity demanded is 1,000 pairs.Calculate the price elasticity of demand when the price of a pair of gloves is $18.