Question 1

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 10% increase in price would lead to:

Accepted Answer

A price elasticity of demand coefficient of 1.6 indicates that the demand for gourmet coffee is relatively elastic. This means that a 10% increase in price would lead to a proportionally larger decrease in quantity demanded. Specifically, a 10% increase in price would lead to a 16% decrease in the quantity of gourmet coffee demanded (1.6 x 10% = 16%). Therefore, the best choice is A.

Question 2

​Exhibit 6-3
​ 
-Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

Accepted Answer

The answer of ​Exhibit 6-3
​ 
-Refer to Exhibit 6-3. The...

Question 3

​Exhibit 6-2
​ 
-Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

Accepted Answer

Graph A represents the inelastic portion of a linear demand curve, where the price elasticity of demand is less than 1. In this section, a decrease in price will lead to a decrease in total revenue, as the percentage change in quantity demanded is less than the percentage change in price.

Question 4

Which of the following is not a major determinant of the price elasticity of demand?

Accepted Answer

The supply of goods available is not a major determinant of the price elasticity of demand. The determinants of price elasticity of demand include the availability of close substitutes, proportion of income spent on the good, amount of time that has elapsed since the price change, and the necessity of the good. The supply of goods available affects the price of the good, but it does not directly affect the price elasticity of demand.

Question 5

The price of a new electronic toy increases from $16 to $24 and the quantity demanded decreases from 1,050 to 950 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

Accepted Answer

The answer of The price of a new electronic toy...

Question 6

A price cut will decrease the total revenue a firm receives if the demand for its product is:

Accepted Answer

When demand is inelastic, a price cut will decrease total revenue because the percentage decrease in price is not offset by a sufficiently large percentage increase in quantity demanded.

Question 7

What type of demand curve is depicted by the graph below?

Accepted Answer

The answer of What type of demand curve is depicted...

Question 8

A bountiful wheat harvest can be bad news for wheat farmers because the

Accepted Answer

When the supply of wheat increases due to a bountiful harvest, the supply curve shifts to the right, leading to a decrease in the equilibrium price of wheat. However, since the demand for wheat is usually inelastic, the decrease in price does not lead to a proportionate increase in quantity demanded. As a result, the total revenue earned by wheat farmers may decrease, even though they are producing more wheat. This is why a bountiful wheat harvest can be bad news for wheat farmers.

Question 9

​Exhibit 6-3
​ 
-Refer to Exhibit 6-3. The graph that best illustrates a relatively inelastic (but not perfectly inelastic) range along a demand curve is:

Accepted Answer

Graph C illustrates a relatively inelastic range along a demand curve. In this range, changes in price have a relatively small effect on the quantity demanded. It is not perfectly inelastic because there is still some responsiveness to the price change, as seen by the slight slope of the curve. Graphs A, B, and D all illustrate different levels of elasticity and do not show a relatively inelastic range.

Question 10

When demand and income move in the same direction, a good is said to be:

Accepted Answer

A normal good is a type of good whose demand increases when the income of the consumer increases. When demand and income move in the same direction, it indicates that the good is a normal good. This is because as the consumer's income increases, their ability to pay for the good also increases, leading to an increase in demand for the good.

Question 11

A price cut will increase the total revenue a firm receives if the demand for its product is:

Accepted Answer

If the demand for a product is elastic, a price cut will lead to a relatively larger increase in the quantity demanded than the decrease in price, resulting in a net increase in total revenue for the firm. In other words, the percentage increase in quantity demanded will be greater than the percentage decrease in price, causing total revenue to rise.

Question 12

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

Accepted Answer

Price elasticity of demand (PED) is measured as the percentage change in quantity demanded resulting from a one percent change in price.

In this case, the price increased by 40% (from $5 to $7), and the quantity demanded decreased by 50% (from 12,000 to 6,000).

PED is calculated as the percentage change in quantity demanded divided by the percentage change in price:

PED = (Δquantity demanded / average quantity demanded) / (Δprice /average price)

PED = ((6000-12000)/9000)/((7-5)/6) = -0.5/0.333 = -1.5

However, PED is always reported as a positive number. So, taking the absolute value, PED = 1.5.

Since the absolute value of PED is greater than 1, the demand is considered relatively elastic, meaning that consumers are very sensitive to changes in price. A 40% increase in price led to a 50% decrease in quantity demanded, which shows that the consumers are quite responsive to price changes.

Therefore, the correct choice is C) 2.0, indicating relatively elastic demand.

Question 13

When a product's price increases from $800 to $1,200, the quantity demanded decreases from 11,000 to 9,000. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((9,000 - 11,000) / 11,000) = -18.18%. The percentage change in price is ((1,200 - 800) / 800) = 50%. The elasticity is |-18.18% / 50%| = 0.3636, which rounds to 0.5.

Question 14

When a product's price increases from $9 to $11, the quantity demanded decreases from 1200 to 800. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

Using the midpoint formula:

% Change in Price = (New Price - Old Price) / [(New Price + Old Price)/2] * 100%
% Change in Price = (11 - 9) / [(11 + 9)/2] * 100%
% Change in Price = 2 / 10 * 100%
% Change in Price = 20%

% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / [(New Quantity Demanded + Old Quantity Demanded)/2] * 100%
% Change in Quantity Demanded = (800 - 1200) / [(800 + 1200)/2] * 100%
% Change in Quantity Demanded = -400 / 1000 * 100%
% Change in Quantity Demanded = -40%

Using the formula for price elasticity of demand:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

Price Elasticity of Demand = -40% / 20%

Price Elasticity of Demand = -2.0 (absolute value)

Therefore, the price elasticity of demand (in absolute terms) is estimated to be 2.0.

Question 15

The price of stadium seats at a baseball game increases from $20 to $30 and ticket sales fall from 45,000 per game to 35,000 per game. If other things remained constant, then it appears that the price elasticity of demand is:

Accepted Answer

The answer of The price of stadium seats at a...

Question 16

Along a linear demand curve, price elasticity of demand is:

Accepted Answer

Price elasticity of demand varies along a linear demand curve, being more elastic (greater than 1) to the northwest (higher prices and lower quantities) and less elastic (less than 1) to the southeast (lower prices and higher quantities).

Question 17

If Education R Us University thought that it faced an inelastic demand for the regular academic year but an elastic demand for summer school, and it wanted to increase its total tuition revenue, it would want to____ tuition in the regular academic year and ____ tuition for summer school

Accepted Answer

When demand is inelastic, increasing prices can lead to an increase in total revenue because the percentage decrease in quantity demanded is less than the percentage increase in price. Conversely, when demand is elastic, decreasing prices can lead to an increase in total revenue because the percentage increase in quantity demanded is greater than the percentage decrease in price. Therefore, Education R Us University would want to increase tuition in the regular academic year (inelastic demand) and decrease tuition for summer school (elastic demand) to increase its total tuition revenue.

Question 18

​Exhibit 6-3
​ 
-Refer to Exhibit 6-3. The graph that best illustrates a perfectly elastic demand curve is

Accepted Answer

The answer of ​Exhibit 6-3
​ 
-Refer to Exhibit 6-3. The...

Question 19

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:

Accepted Answer

Since the demand elasticity is less than 1 (0.91), it indicates that demand is inelastic. This means that a percentage increase in tuition will lead to a smaller percentage decrease in quantity demanded, potentially increasing total revenue. Therefore, increasing tuition could be a viable strategy for enhancing the school's budget.

Question 20

​Exhibit 6-2
​ 
-Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph B represents the section of the curve where:

Accepted Answer

Graph B represents the elastic portion of a linear demand curve, where the price elasticity of demand is greater than 1, meaning that a percentage change in price leads to a larger percentage change in quantity demanded. In this section, an increase in price will indeed lead to a decrease in total revenue, as the proportional decrease in quantity demanded will outweigh the increase in price.

Quiz 6: Elasticities

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 10% increase in price would lead to:

Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

Exhibit 6-2 -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

Which of the following is not a major determinant of the price elasticity of demand?

The price of a new electronic toy increases from $16 to $24 and the quantity demanded decreases from 1,050 to 950 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

A price cut will decrease the total revenue a firm receives if the demand for its product is:

What type of demand curve is depicted by the graph below?

A bountiful wheat harvest can be bad news for wheat farmers because the

Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a relatively inelastic (but not perfectly inelastic) range along a demand curve is:

When demand and income move in the same direction, a good is said to be:

A price cut will increase the total revenue a firm receives if the demand for its product is:

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

When a product's price increases from $800 to $1,200, the quantity demanded decreases from 11,000 to 9,000. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

When a product's price increases from $9 to $11, the quantity demanded decreases from 1200 to 800. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

The price of stadium seats at a baseball game increases from $20 to $30 and ticket sales fall from 45,000 per game to 35,000 per game. If other things remained constant, then it appears that the price elasticity of demand is:

Along a linear demand curve, price elasticity of demand is:

If Education R Us University thought that it faced an inelastic demand for the regular academic year but an elastic demand for summer school, and it wanted to increase its total tuition revenue, it would want to tuition in the regular academic year and tuition for summer school

Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a perfectly elastic demand curve is

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:

Exhibit 6-2 -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph B represents the section of the curve where:

Quiz 6: Elasticities

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 10% increase in price would lead to:

​Exhibit 6-3 ​ -Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

​Exhibit 6-2 ​ -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

Which of the following is not a major determinant of the price elasticity of demand?

The price of a new electronic toy increases from $16 to $24 and the quantity demanded decreases from 1,050 to 950 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

A price cut will decrease the total revenue a firm receives if the demand for its product is:

What type of demand curve is depicted by the graph below?

A bountiful wheat harvest can be bad news for wheat farmers because the

​Exhibit 6-3 ​ -Refer to Exhibit 6-3. The graph that best illustrates a relatively inelastic (but not perfectly inelastic) range along a demand curve is:

When demand and income move in the same direction, a good is said to be:

A price cut will increase the total revenue a firm receives if the demand for its product is:

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

When a product's price increases from $800 to $1,200, the quantity demanded decreases from 11,000 to 9,000. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

When a product's price increases from $9 to $11, the quantity demanded decreases from 1200 to 800. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

The price of stadium seats at a baseball game increases from $20 to $30 and ticket sales fall from 45,000 per game to 35,000 per game. If other things remained constant, then it appears that the price elasticity of demand is:

Along a linear demand curve, price elasticity of demand is:

If Education R Us University thought that it faced an inelastic demand for the regular academic year but an elastic demand for summer school, and it wanted to increase its total tuition revenue, it would want to____ tuition in the regular academic year and ____ tuition for summer school

​Exhibit 6-3 ​ -Refer to Exhibit 6-3. The graph that best illustrates a perfectly elastic demand curve is

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:

​Exhibit 6-2 ​ -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph B represents the section of the curve where:

Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

Exhibit 6-2 -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a relatively inelastic (but not perfectly inelastic) range along a demand curve is:

If Education R Us University thought that it faced an inelastic demand for the regular academic year but an elastic demand for summer school, and it wanted to increase its total tuition revenue, it would want to tuition in the regular academic year and tuition for summer school

Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a perfectly elastic demand curve is

Exhibit 6-2 -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph B represents the section of the curve where: