Question 1

Suppose you observe that minor changes in supply seem to cause dramatic changes in price with only slight changes in the amount sold, you would conclude that

Accepted Answer

When demand is inelastic, it means that consumers are not very responsive to price changes. Therefore, even minor changes in supply (and consequently in price) will not significantly alter the quantity demanded, leading to dramatic price changes with only slight changes in the amount sold.

Question 2

If the price falls and the total amount consumers spend on the good rises, then demand must be

Accepted Answer

When the price of a good falls and the total expenditure on that good increases, it indicates that the quantity demanded increased by a proportion greater than the decrease in price, which is a characteristic of elastic demand. Elastic demand means consumers are highly responsive to price changes.

Question 3

For a given increase in supply, the condition of demand that will result in no change in quantity is when demand is

Accepted Answer

When demand is perfectly inelastic, the quantity demanded remains the same regardless of a change in price or supply. Therefore, even with an increase in supply, the quantity demanded remains unchanged, resulting in no change in quantity.

Question 4

For a given decrease in supply, the condition of demand that will result in no change in quantity is when demand is

Accepted Answer

If there is a decrease in supply and demand is perfectly inelastic, there will be no change in quantity. This is because consumers are willing to pay the same price regardless of the change in supply, so there is no need for the price to change to balance the market. Therefore, option D (perfectly inelastic) is the best choice.

Question 5

An increase in demand will increase prices most when supply is

Accepted Answer

When supply is perfectly inelastic, it means that the quantity supplied cannot change regardless of the price change. Therefore, if demand increases, prices will increase significantly because the quantity supplied cannot adjust to meet the higher demand.

Question 6

If the price rises and the total amount consumers spend on the good falls, then demand must be

Accepted Answer

When the price of a good rises and the total amount consumers spend on the good falls, it indicates that the demand for the good is sensitive to changes in price. This is a characteristic of elastic demand, where a small change in price causes a larger change in quantity demanded. Therefore, the correct choice is A) elastic.

Question 7

For a given increase in supply, the condition of demand that will result in no change in price is when demand is

Accepted Answer

When demand is perfectly elastic, consumers are extremely sensitive to price changes, meaning any increase in supply (without a change in price) will be absorbed by an equivalent increase in quantity demanded, resulting in no change in price.

Question 8

For a given decrease in supply, the condition of demand that will result in the most significant change in price is when demand is

Accepted Answer

If demand is elastic, a decrease in supply will result in a relatively large decrease in quantity demanded, causing a bigger decrease in price. This is because consumers are more sensitive to changes in price and have more alternatives to switch to when the supply decreases. In contrast, if demand is inelastic, a decrease in supply will result in a relatively small decrease in quantity demanded, leading to a smaller change in price. This is because consumers are less sensitive to changes in price and have fewer alternatives to switch to when the supply decreases. Therefore, the condition of elastic demand will result in the most significant change in price for a given decrease in supply.

Question 9

For a given increase in supply, the condition of demand that will result in the most significant change in price is when demand is

Accepted Answer

When demand is perfectly inelastic, consumers are willing to buy the same quantity regardless of the price. Therefore, an increase in supply, when demand is perfectly inelastic, would result in a significant change in price because consumers would not change their quantity demanded in response to the price change.

Question 10

Suppose a firm can not figure out whether the demand for the good it sells is elastic or inelastic but discovers that every time it raises its price, its total revenue declines. Their

Accepted Answer

If total revenue declines every time the firm raises its price, it means that the demand for the good is sensitive to price changes. This indicates that the demand is elastic, as a small change in price leads to a relatively larger change in quantity demanded, causing total revenue to decrease when prices increase.

Question 11

An increase in demand will increase prices least when supply is

Accepted Answer

When supply is elastic, producers can increase production easily in response to higher demand, leading to a smaller increase in prices.

Question 12

If the price rises and the total amount consumers spend on the good rises, then demand must be

Accepted Answer

When the price of a good rises and the total amount consumers spend on it also increases, it indicates that the demand for the good is inelastic. This means that the percentage change in quantity demanded is less than the percentage change in price, leading consumers to spend more despite the higher price.

Question 13

If the price rises and the total amount consumers spend on the good falls to zero, then demand must be

Accepted Answer

If the total amount consumers spend on the good falls to zero when the price rises, it means consumers stop buying the good entirely at any price increase. This behavior is characteristic of perfectly elastic demand, where the quantity demanded drops to zero with any increase in price.

Question 14

If the price of a good falls by 10% and the total amount consumers spend on the good remains the same then the good is

Accepted Answer

When the price of a good falls by 10% and the total expenditure on the good remains the same, it indicates that the quantity demanded increased proportionally to offset the price decrease, which is characteristic of unit elastic demand.

Question 15

For a given increase in supply, the condition of demand that will result in the most significant change in quantity is when demand is

Accepted Answer

When demand is perfectly elastic, even a small change in price leads to an infinite change in the quantity demanded, meaning any increase in supply would result in the most significant change in quantity compared to other demand conditions.

Question 16

If the price rises and the total amount consumers spend on the good remains unchanged, then demand must be

Accepted Answer

When the price rises and the total expenditure remains the same, it indicates unit elasticity. This means the percentage change in quantity demanded is exactly equal to the percentage change in price.

Question 17

For a given decrease in supply, the condition of demand that will result in no change in price is when demand is

Accepted Answer

When demand is perfectly elastic, any decrease in supply will not change the price because consumers will only buy at a specific price, leading to a change in quantity demanded instead.

Question 18

If the price falls and the total amount consumers spend on the good remains unchanged, then demand must be

Accepted Answer

When the price falls and the total expenditure on the good remains the same, it indicates unit elasticity. This means the percentage change in quantity demanded is exactly equal to the percentage change in price, leading to no change in total expenditure.

Question 19

If the price falls and the total amount consumers spend on the good falls, then demand must be

Accepted Answer

If the price falls and the total amount consumers spend on the good falls, then demand must be inelastic. Inelastic demand means that the change in price has a relatively small effect on the quantity demanded. Therefore, when the price falls, the decrease in revenue from the lower price is greater than the increase in revenue from the additional sales that result from the lower price, leading to a decrease in the total amount consumers spend on the good.

Question 20

For a given decrease in supply, the condition of demand that will result in the most significant change in quantity is when demand is

Accepted Answer

When demand is perfectly elastic, any decrease in supply will result in the most significant change in quantity, as consumers are extremely sensitive to price changes and will adjust their quantity demanded drastically in response to any price change.

Quiz 3: The Concept of Elasticity and Consumer and Producer Surplus