Question 1

Suppose that local dry cleaner shop faces a demand curve that is liner and that the current price for its garments is set at a point where the price elasticity is 1.7.If the local dry cleaner shop increases the price per garment:
A)the demand becomes less elastic and the total revenue decreases.
B)the demand becomes more elastic and the total revenue decreases.
C)the demand becomes less elastic and the total revenue increases.
D)the demand becomes more elastic and the total revenue increases.

Accepted Answer

The question states that the current price elasticity is 1.7, which means that the demand is relatively elastic. If the dry cleaner increases the price per garment, the demand will become even more elastic, meaning that consumers will be more price-sensitive and will be less likely to purchase garments from the dry cleaner. This will lead to a decrease in total revenue for the dry cleaner. Therefore, the best choice is B.

Question 2

When measured along a linear downward-sloping demand curve,the price elasticity:
A)remains constant and is greater than one.
B)remains constant and is less than one.
C)increases in absolute value from left to right.
D)decreases in absolute value from left to right.

Accepted Answer

When measured along a linear downward-sloping demand curve, the price elasticity decreases in absolute value from left to right. This means that demand becomes less elastic as we move downwards along the demand curve, and customers become less responsive to changes in price.

Question 3

Comment on the following statement: "Elasticity is constant along a straight-line demand curve."

Accepted Answer

The answer of Comment on the following statement: "Elasticity is...

Question 4

If the quantity demanded of soda increases by 4% when the price of coffee increases by 16%,the cross-price elasticity of demand between soda and coffee is:
A)-0.25.
B)0.25.
C)-12.0.
D)12.0.

Accepted Answer

The cross-price elasticity of demand is calculated as the percentage change in quantity demanded of one good divided by the percentage change in price of another good. Here, it is 4% / 16% = 0.25.

Question 5

The income elasticity of demand for popcorn is -1.1.Therefore,if income increases,the demand for popcorn will increase.

Accepted Answer

A negative income elasticity of demand for a good implies that it is an inferior good, meaning that as income increases, demand for the good actually decreases. Therefore, if income increases, the demand for popcorn will actually decrease based on the given income elasticity of demand.

Question 6

Recall the Application about finding estimates on elasticities of demand,which of the following Web sites provides estimates of demand elasticities for hundreds of food products in different countries?
A)the United Nations
B)the World Bank
C)the U.S.Department of Commerce
D)the U.S Department of Agriculture

Accepted Answer

The U.S. Department of Agriculture provides estimates of demand elasticities for hundreds of food products in different countries through their Economic Research Service.

Question 7

Demand is elastic along the upper half of a liner demand curve,so an increase in quantity from a decrease in price decreases total revenue.

Accepted Answer

When demand is elastic, an increase in quantity from a decrease in price increases total revenue. This is because the increase in quantity sold more than offsets the decrease in price, resulting in an overall increase in revenue. Therefore, the statement in the question is false.

Question 8

Comment on the following statement: "Elasticity is constant along a straight-line demand curve."

Accepted Answer

The answer of Comment on the following statement: "Elasticity is...

Question 9

Lenny buys less oatmeal for breakfast when his income rises.This means that,for Lenny:
A)oatmeal is an normal good.
B)the income elasticity of demand for oatmeal is positive.
C)the income elasticity of demand for oatmeal is negative.
D)A and C are correct.

Accepted Answer

When Lenny's income increases, his demand for oatmeal decreases. This indicates a negative relationship between income and demand for oatmeal, which means the income elasticity of demand for oatmeal is negative. Therefore, option C is the correct answer.

Question 10

Suppose that a 5% increase in the price of gasoline leads to a 15% decrease in the quantity demanded of SUVs.The cross-price elasticity of demand for SUVs is:
A)3.0.
B)3.3.
C).33.
D)33.

Accepted Answer

The cross-price elasticity of demand is calculated as the percentage change in quantity demanded of one good divided by the percentage change in price of another good. Here, it is -15% / 5% = -3.0.

Question 11

Price elasticity of demand tends to be more elastic as you move down the linear demand curve.

Accepted Answer

Price elasticity of demand tends to be more inelastic as you move down the linear demand curve because the percentage change in quantity demanded becomes smaller relative to the percentage change in price.

Question 12

Suppose that the price elasticity of demand for museum tickets is equal to 1.8.If the price of a museum ticket rises by 30 percent,what will happen to quantity demanded?

Accepted Answer

The answer of Suppose that the price elasticity of demand...

Question 13

-Refer to Figure 5.7.As the price of W increased,the demand for Y shifted from  to  .The cross-price elasticity of demand between W and Y is:
A)positive.
B)negative.
C)zero.
D)indeterminate from this information.

Accepted Answer

The answer of 
-Refer to Figure 5.7.As the price of...

Question 14

Price elasticity of demand remains unit elastic as you move up the demand curve.

Accepted Answer

Price elasticity of demand becomes less elastic (closer to zero) as you move up the demand curve. At the mid-point of the demand curve, price elasticity is unit elastic (equal to 1); however, as you move towards either end of the demand curve, price elasticity becomes less elastic or more elastic, depending on the slope of the curve.

Question 15

When moving upward the along a liner demand curve,what happens to the price elasticity of the demand?
A)decreases
B)increases
C)stays the same
D)none of the above

Accepted Answer

When moving upward along a linear demand curve, the price elasticity of the demand increases. This is because, as the price increases, consumers become more sensitive to the price change and decrease their quantity demanded, making the demand more elastic.

Question 16

Suppose that a coffee shop faces a demand curve that is liner and that the current price for its cup of coffee is set at a point where the price elasticity is 1.2.If the local dry cleaner shop increases the price per garment:
A)the demand becomes more elastic and the total revenue decreases.
B)the demand becomes less elastic and the total revenue decreases.
C)the demand becomes less elastic and the total revenue increases.
D)the demand becomes more elastic and the total revenue increases.

Accepted Answer

The answer of Suppose that a coffee shop faces a...

Question 17

Good X and good Y are substitutes if the:
A)income elasticity of each is negative.
B)income elasticity of each is positive.
C)cross-price elasticity is negative.
D)cross-price elasticity is positive.

Accepted Answer

When two goods are substitutes, an increase in the price of one leads to an increase in the demand for the other, which is indicated by a positive cross-price elasticity.

Question 18

Suppose that the price elasticity of demand for an ice cream cone is 1.9.If the local ice cream shop owner wants to increase total revenue,what would you recommend he or she do?

Accepted Answer

The answer of Suppose that the price elasticity of demand...

Question 19

Two goods are complements if the:
A)price elasticity of each is greater than one.
B)income elasticity of each is negative.
C)cross-price elasticity is negative.
D)cross-price elasticity is positive.

Accepted Answer

Complementary goods are those whose cross-price elasticity is negative, meaning that an increase in the price of one good leads to a decrease in the quantity demanded of the other good. For example, coffee and cream are complements, as an increase in the price of coffee would lead to a decrease in the demand for cream (assuming no substitution effects). Price elasticity and income elasticity are not necessarily indicative of complementarity.

Question 20

Chris buys more new jewelry when her income rises.This means that,for Chris:
A)new jewelry is an inferior good.
B)the income elasticity of demand for new jewelry is positive.
C)the income elasticity of demand for new jewelry is negative.
D)none of the above

Accepted Answer

The statement states that Chris buys more new jewelry when her income rises, which implies that new jewelry is a normal good for Chris. Therefore, the income elasticity of demand for new jewelry is positive.

Quiz 5: Elasticity: a Measure of Responsiveness

Suppose that local dry cleaner shop faces a demand curve that is liner and that the current price for its garments is set at a point where the price elasticity is 1.7.If the local dry cleaner shop increases the price per garment:

When measured along a linear downward-sloping demand curve,the price elasticity:

Comment on the following statement: "Elasticity is constant along a straight-line demand curve."

If the quantity demanded of soda increases by 4% when the price of coffee increases by 16%,the cross-price elasticity of demand between soda and coffee is:

The income elasticity of demand for popcorn is -1.1.Therefore,if income increases,the demand for popcorn will increase.

Recall the Application about finding estimates on elasticities of demand,which of the following Web sites provides estimates of demand elasticities for hundreds of food products in different countries?

Demand is elastic along the upper half of a liner demand curve,so an increase in quantity from a decrease in price decreases total revenue.

Comment on the following statement: "Elasticity is constant along a straight-line demand curve."

Lenny buys less oatmeal for breakfast when his income rises.This means that,for Lenny:

Suppose that a 5% increase in the price of gasoline leads to a 15% decrease in the quantity demanded of SUVs.The cross-price elasticity of demand for SUVs is:

Price elasticity of demand tends to be more elastic as you move down the linear demand curve.

Suppose that the price elasticity of demand for museum tickets is equal to 1.8.If the price of a museum ticket rises by 30 percent,what will happen to quantity demanded?

-Refer to Figure 5.7.As the price of W increased,the demand for Y shifted from to .The cross-price elasticity of demand between W and Y is:

Price elasticity of demand remains unit elastic as you move up the demand curve.

When moving upward the along a liner demand curve,what happens to the price elasticity of the demand?

Suppose that a coffee shop faces a demand curve that is liner and that the current price for its cup of coffee is set at a point where the price elasticity is 1.2.If the local dry cleaner shop increases the price per garment:

Good X and good Y are substitutes if the:

Suppose that the price elasticity of demand for an ice cream cone is 1.9.If the local ice cream shop owner wants to increase total revenue,what would you recommend he or she do?

Two goods are complements if the:

Chris buys more new jewelry when her income rises.This means that,for Chris: