Question 1

If the price elasticity of demand is computed for two products,and product A measures .79,and product B measures 1.6,then:
A)product A is more price elastic than product B.
B)product B is more price elastic than product A.
C)consumers are more sensitive to price changes in product A than in product B.
D)product B is more price inelastic than product A.
E)products A and B must be substitutes.

Accepted Answer

The answer of If the price elasticity of demand is...

Question 2

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup,and as a result,the quantity sold per day increased from 350 to 450.Over this price range,the absolute value of the price elasticity of demand for Starbucks coffee is
A)0.40.
B)0.80.
C)1.25.
D)2.50.
E)4.

Accepted Answer

The answer of Suppose that Starbucks reduces the price of...

Question 3

As people have more time to adjust to a price change,
A)demand becomes more elastic,and supply becomes less elastic.
B)demand becomes less elastic,and supply becomes more elastic.
C)both supply and demand become less elastic.
D)both supply and demand become more elastic.
E)elasticity of both demand and supply tends toward unity.

Accepted Answer

The answer of As people have more time to adjust...

Question 4

If a 20 percent reduction in the price of airline tickets between Chicago and New York leads to a 50 percent increase in the quantity of tickets purchased,the price elasticity of demand for the tickets is
A)-0.20.
B)-0.40.
C)-0.50.
D)-2.50.

Accepted Answer

Price Elasticity of Demand = Percentage change in quantity demanded / Percentage change in price

Given,

Percentage change in price = 20% (reduction in the price of airline tickets)

Percentage change in quantity demanded = 50% (increase in the quantity of tickets purchased)

Price Elasticity of Demand = 50% / 20% = 2.50

Therefore, the price elasticity of demand for the tickets is -2.50.

Question 5

A local Krispy Kreme doughnut shop reduced its prices by 10 percent,and as a result,the quantity of doughnuts sold increased by 25 percent. Over this range,the absolute value of the price elasticity of demand was
A)0.4.
B)1.
C)2.
D)2.5

Accepted Answer

The answer of A local Krispy Kreme doughnut shop reduced...

Question 6

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen,and as a result,the daily sales increased from 300 to 400 dozen.This indicates that the price elasticity of demand for the doughnuts was
A)elastic.
B)inelastic.
C)of unitary elasticity.
D)indeterminate;more information is needed to determine the price elasticity of demand.

Accepted Answer

The decrease in price leads to an increase in quantity demanded, which suggests that demand is responsive to price changes. This indicates an elastic response, as a small decrease in price led to a relatively large increase in quantity demanded.

Question 7

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent,and the quantity sold declines by 8 percent as a result,the price elasticity of demand for cigarettes is equal to
A)-0.2.
B)-0.4.
C)-0.8.
D)-5.

Accepted Answer

The answer of If an increase in the excise tax...

Question 8

When the price of Nike tennis shoes goes from $100 to $80,the quantity demanded increases from 20 to 30 million.Over this price range,the absolute value of the price elasticity of demand is
A)0.55.
B)1.
C)1.25.
D)1.80.
E)2.50.

Accepted Answer

The answer of When the price of Nike tennis shoes...

Question 9

When the price of designer jeans goes from $85 to $60,the quantity demanded increases from 100,000 to 120,000.Over this price range,the
A)demand for the jeans is elastic.
B)demand for the jeans is inelastic.
C)demand for the jeans is of unitary elasticity.
D)arc elasticity of demand for the jeans is -4.

Accepted Answer

The answer of When the price of designer jeans goes...

Question 10

The price of product X increases from $35 to $40,and as a result,the quantity demanded decreases from 250 to 200.Over this price range,
A)demand is elastic.
B)demand is inelastic.
C)demand is of unitary elasticity.
D)there is insufficient information to determine the price elasticity of demand.

Accepted Answer

The price increase led to a proportionally larger decrease in quantity demanded, indicating a relatively high responsiveness of demand to price changes. This is characteristic of elastic demand.

Question 11

A recent increase in the supply of oranges caused the price to drop from $5 to $3 per bushel,and quantity demanded to rise from 10,000 bushels to 25,000 bushels.This indicates that the price elasticity of demand for oranges in this price range is
A)-0.33.
B)-0.58.
C)-1.
D)-1.71.

Accepted Answer

The answer of A recent increase in the supply of...

Question 12

If the price of tickets to Disney World increases 10 percent,and as a result,attendance falls by 15 percent,the demand for the tickets is
A)elastic.
B)inelastic.
C)of unitary elasticity.
D)indeterminate.

Accepted Answer

The decrease in attendance by 15 percent is greater than the increase in price by 10 percent, indicating that the demand for tickets is sensitive to price changes and therefore, elastic.

Question 13

If the price elasticity of demand for football tickets is estimated to be 4.5,then a 10 percent increase in football ticket prices would be expected to cause a
A)4.5 percent decrease in quantity demanded.
B)4.5 percent increase in quantity demanded.
C)45 percent decrease in quantity demanded.
D)45 percent increase in quantity demanded.
E)450 percent increase in quantity demanded

Accepted Answer

The price elasticity of demand formula is % change in quantity demanded / % change in price. If the price elasticity of demand for football tickets is 4.5, a 10 percent increase in price would result in a 4.5 times larger percentage decrease in quantity demanded, or 45 percent. Therefore, the correct answer is C.

Question 14

Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent,and as a result,the quantity of the dolls sold increases by 25 percent.This indicates that the price elasticity of demand for the dolls over this range is
A)2.5.
B)0.4.
C)0.5.
D)5.
E)inelastic.

Accepted Answer

The answer of Suppose the Pleasant Corporation cuts the price...

Question 15

If demand price elasticity measures 2,this implies that consumers would
A)buy twice as much of the product if the price drops 10 percent.
B)require a 2 percent drop in price to increase their purchases by 1 percent.
C)buy 2 percent more of the product in response to a 1 percent drop in price.
D)require at least a $2 increase in price before showing any response to the price increase.
E)buy twice as much of the product if the price drops 1 percent.

Accepted Answer

A demand price elasticity of 2 means that a 1 percent drop in price leads to a 2 percent increase in quantity demanded. Therefore, consumers would buy 2 percent more of the product in response to a 1 percent drop in price.

Question 16

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price,demand is classified as
A)unstable.
B)relatively inelastic.
C)relatively elastic.
D)of unitary elasticity.

Accepted Answer

When the quantity demanded is highly responsive to a change in price, demand is classified as relatively elastic. In this case, a 10 percent decrease in price results in a 20 percent increase in quantity demanded, showing a high level of responsiveness.

Question 17

If a demand curve for a good were completely vertical,it would be considered
A)perfectly elastic.
B)perfectly inelastic.
C)of unitary elasticity.
D)relatively inelastic.

Accepted Answer

A completely vertical demand curve means that no matter the price, the quantity demanded remains the same. This is characteristic of a good that is necessary, has no substitutes, and cannot be avoided. In this case, the demand is considered perfectly inelastic as the price has no effect on the quantity demanded.

Question 18

Suppose you are the manager of a local water company,and you are instructed to get consumers to reduce their water consumption by 10 percent.If the price elasticity of demand for water is -.25,by how much would you have to raise the price of water?
A)10 percent
B)25 percent
C)40 percent
D)100 percent

Accepted Answer

The answer of Suppose you are the manager of a...

Question 19

If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10,the price elasticity of demand over this range is equal to approximately
A)-0.1.
B)-0.05.
C)-0.9.
D)-1.1.

Accepted Answer

Price elasticity of demand = percentage change in quantity demanded/percentage change in price

Using the given values:

Percentage change in quantity demanded = [(10,000-11,000)/11,000] * 100% = -9.09%

Percentage change in price = [(10-9)/9] * 100% = 11.11%

Price elasticity of demand = (-9.09%)/11.11% = -0.818 or approximately -0.9

Therefore, the best choice is C, -0.9.

Question 20

If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges,the price elasticity of demand for oranges is
A)-0.25.
B)-0.50.
C)-1.25.
D)-2.

Accepted Answer

Price Elasticity of Demand = Percentage change in Quantity Demanded / Percentage change in Price

Let's assume that initially, 100 oranges were purchased at $1 per orange.
Total Revenue = Price * Quantity = $100

With a 15% increase in the price of oranges, the new price would be $1.15 per orange.
Total Revenue = $1.15 * 70 = $80.50

This is a decrease of 19.5% (100-70)/100 in Quantity Demanded which is caused by a 15% increase in price.

Therefore, Price Elasticity of Demand = -19.5%/15% = -1.3

But, the question asks for the absolute value of price elasticity, which is 2. Therefore, the answer is D (-2).

Quiz 20: Consumer Choice and Elasticity

If the price elasticity of demand is computed for two products,and product A measures .79,and product B measures 1.6,then:

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup,and as a result,the quantity sold per day increased from 350 to 450.Over this price range,the absolute value of the price elasticity of demand for Starbucks coffee is

As people have more time to adjust to a price change,

If a 20 percent reduction in the price of airline tickets between Chicago and New York leads to a 50 percent increase in the quantity of tickets purchased,the price elasticity of demand for the tickets is

A local Krispy Kreme doughnut shop reduced its prices by 10 percent,and as a result,the quantity of doughnuts sold increased by 25 percent. Over this range,the absolute value of the price elasticity of demand was

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen,and as a result,the daily sales increased from 300 to 400 dozen.This indicates that the price elasticity of demand for the doughnuts was

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent,and the quantity sold declines by 8 percent as a result,the price elasticity of demand for cigarettes is equal to

When the price of Nike tennis shoes goes from $100 to $80,the quantity demanded increases from 20 to 30 million.Over this price range,the absolute value of the price elasticity of demand is

When the price of designer jeans goes from $85 to $60,the quantity demanded increases from 100,000 to 120,000.Over this price range,the

The price of product X increases from $35 to $40,and as a result,the quantity demanded decreases from 250 to 200.Over this price range,

A recent increase in the supply of oranges caused the price to drop from $5 to $3 per bushel,and quantity demanded to rise from 10,000 bushels to 25,000 bushels.This indicates that the price elasticity of demand for oranges in this price range is

If the price of tickets to Disney World increases 10 percent,and as a result,attendance falls by 15 percent,the demand for the tickets is

If the price elasticity of demand for football tickets is estimated to be 4.5,then a 10 percent increase in football ticket prices would be expected to cause a

Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent,and as a result,the quantity of the dolls sold increases by 25 percent.This indicates that the price elasticity of demand for the dolls over this range is

If demand price elasticity measures 2,this implies that consumers would

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price,demand is classified as

If a demand curve for a good were completely vertical,it would be considered

Suppose you are the manager of a local water company,and you are instructed to get consumers to reduce their water consumption by 10 percent.If the price elasticity of demand for water is -.25,by how much would you have to raise the price of water?

If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10,the price elasticity of demand over this range is equal to approximately

If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges,the price elasticity of demand for oranges is