Deck 4: Elasticity

Question 1

If the value of the price elasticity of demand is 0.6,demand is said to be

A)elastic.
B)partially elastic.
C)inelastic.
D)partially inelastic.
E)somewhat inelastic.

Answer 1

inelastic.

Question 2

When the percentage change in quantity demanded is less than the percentage change in price that brought it about,demand is said to be

A)zero elastic.
B)unelastic.
C)inelastic.
D)unit elastic.
E)elastic.

Answer 2

inelastic.

Question 3

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1
Refer to Table 4-1.Between the prices of $4 and $6 the price elasticity of demand is

A)0.50.
B)0.71.
C)1.00.
D)1.40.
E)0.40.

Answer 3

0.71.

Question 4

Consider two demand curves and the same price change for both.If the resulting percentage change in quantity demanded is greater for one ( D1)than the other (D2),we can conclude

A)that D1 is inelastic and D2 is elastic.
B)that D1 is elastic and D2 is inelastic.
C)that D2 is more elastic than D1.
D)that D1 is more elastic than D2.
E)nothing about their relative elasticities.

Question 5

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit.The price elasticity of demand for this product is

A)1/3.
B)2/3.
C)1.
D)3/2.
E)2.

Question 6

The formula for the price elasticity of demand for a commodity can be written as which of the following?

A)
B)
C)
D)
Е)

Question 7

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit.The price elasticity of demand for this product is

A)0.5.
B)1.0.
C)1.5.
D)2.0.
E)4.0.

Question 8

If household income increases by 50% and desired household expenditure on vacation travel increases by 15%,the price elasticity of demand for vacation travel is

A)elastic.
B)inelastic.
C)unity.
D)positive.
E)not determinable from the information given.

Question 9

Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litres per week as a result of a 10% increase in its price.The price elasticity of demand for lemonade is therefore

A)0.6.
B)6.0.
C)1.97.
D)1.03.
E)impossible to compute unless we know the before and after prices.

Question 10

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1
Refer to Table 4-1.Between the prices of $8 and $10,the elasticity of demand is

A)1/3.
B)2/3.
C)1.
D)2.
E)3.

Question 11

When the percentage change in quantity demanded is greater than the percentage change in price that brought it about,demand is said to be

A)zero elastic.
B)unelastic.
C)inelastic.
D)unit elastic.
E)elastic.

Question 12

If the price elasticity of demand for some good is 2.7,a 10% increase in the price results in

A)a 2.7% decrease in the quantity demanded.
B)a 2.7% increase in the quantity demanded.
C)a 27% increase in the quantity demanded.
D)a 27% decrease in the quantity demanded.
E)There is not enough information to answer this question.

Question 13

The price elasticity of demand measures the responsiveness of

A)quantity demanded to changes in the price.
B)the price to changes in quantity demanded.
C)demand to supply changes.
D)supply to demand changes.
E)equilibrium changes.

Question 14

If the price elasticity of demand is 0.5,then a 10% increase in price results in a

A)50% reduction in quantity demanded.
B)5% increase in quantity demanded.
C)5% decrease in total revenues.
D)5% decrease in quantity demanded.
E)0.5% decrease in quantity demanded.

Question 15

Suppose the price elasticity of demand for some good is 1.4.A 10% increase in the price of the good results in

A)a 1.4% decrease in the quantity demanded.
B)a 1.4% increase in the quantity demanded.
C)a 14% increase in the quantity demanded.
D)a 14% decrease in the quantity demanded.
E)There is not enough information to answer this question.

Question 16

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1
Refer to Table 4-1.The elasticity of demand for museum admissions is

A)greater at higher prices than at lower prices.
B)elastic at all points on the demand curve.
C)inelastic at all points on the demand curve.
D)greater at lower prices than at higher prices.
E)constant at all points on the demand curve.

Question 17

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1
Refer to Table 4-1.Between the prices of $2 and $4 the price elasticity of demand is

A)1/3.
B)2/3.
C)1.
D)2.
E)3.

Question 18

A demand curve that is the shape of a rectangular hyperbola

A)is elastic over the whole curve.
B)is inelastic over the whole curve.
C)is unit elastic over the whole curve.
D)has the same elasticity as a straight-line demand curve.
E)has an elasticity of 100% over the whole curve.

Question 19

If demand is unit elastic at all prices,then the demand curve is

A)a straight line.
B)a parabola.
C)a rectangular hyperbola.
D)upward sloping.
E)perfectly horizontal.

Question 20

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1
Refer to Table 4-1.Between the prices of $8 and $6 the price elasticity of demand is

A)0.5.
B)0.71.
C)1.00.
D)1.40.
E)0.40.

Question 21

Which of the following statements about price elasticity of demand is true?

A)It is greater than one if the percentage increase in the commodityʹs price is greater than the percentage decline in quantity demanded.
B)It is very small when good substitutes are readily available for the commodity.
C)It usually increases over time.
D)It is a positive number because price and quantity demanded move in the same direction.
E)It is higher for an entire group of related products than it is for a particular product in that group.

Question 22

Suppose you are shown two intersecting demand curves that are drawn on the same scale.At the point of intersection,one of the demand curves is steeper than the other.Which of the following could explain the difference in slopes?

A)The steeper one has a higher income elasticity of demand.
B)The steeper one is probably the demand curve for a luxury good.
C)The steeper one applies for the short run whereas the flatter one applies for the long run.
D)The flatter one is for a good with no close substitutes.
E)It is not possible to compare the slopes of different demand curves.

Question 23

Which of the following statements would you expect to be true about price elasticities of demand for T -shirts and clothing?

A)Compared with clothing,T-shirts have a lower price elasticity of demand because they are specifically defined.
B)Because T-shirts are clothing,but not all clothing is T-shirts,T-shirts would have a lower price elasticity of demand than clothing.
C)Clothing has a higher price elasticity of demand because it is a necessity.
D)T-shirts would have the same price elasticity of demand as clothing.
E)Clothing has a lower price elasticity of demand because it is more broadly defined.

Question 24

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day.Short-run price elasticity of demand is constant at 0.3.If the supply of gasoline is reduced so that the price rises to $1.50 per litre,then quantity demanded is predicted to fall in the short run by

A)15%,and total expenditure will rise.
B)15%,and total expenditure will fall.
C)50%,and total expenditure will fall.
D)12%,and total expenditure will rise.
E)13.3%,and total expenditure will rise.

Question 25

A perfectly horizontal demand curve shows that the price elasticity of demand is

A)zero.
B)unity.
C)less than one.
D)infinite.
E)not defined.

Question 26

Suppose that the quantity demanded of a good rises from 40 units to 60 units per month when the price falls from $1.05 to 95 cents per unit.The price elasticity of demand for this product is

A)0.5.
B)1.0.
C)1.5.
D)2.0.
E)4.0.

Question 27

As the price for some product increases from $4.00 to $5.00 per unit,quantity demanded decreases from 400 to 300 units per month.For this segment of the demand curve,the price elasticity of demand is

A)7/9.
B)1.
C)9/7.
D)7.
E)9.

Question 28

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day.Long-run price elasticity of demand is constant at 0.8.If the supply of gasoline is reduced so that the price rises to $1.50 per litre,then quantity demanded is predicted to fall in the long run by

A)12%,and total expenditure will fall.
B)32%,and total expenditure will rise.
C)15%,and total expenditure will rise.
D)15%,and total expenditure will fall.
E)50%,and total expenditure will rise.

Question 29

The price elasticity of demand for a product tends to be greater the

A)lower its price.
B)more broadly the product is defined.
C)fewer close substitutes for it there are.
D)more close substitutes for it there are.
E)shorter the time span being considered.

Question 30

Suppose that the quantity demanded of paperback novels rises from 80 000 to 120 000 units per month when the price falls from $11 to $9 per unit.The price elasticity of demand for this product is

A)1/3.
B)1.
C)2/3.
D)3/2.
E)2.

Question 31

If per capita income increases by 10% and household expenditure on fur coats increases by 15%,one can conclude that the price elasticity of demand for fur coats is

A)elastic.
B)inelastic.
C)unity.
D)positive.
E)not determinable from the information given.

Question 32

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the long-run price elasticity of demand is constant at 0.8.If a tax on gasoline causes the price to rise to $1.50 per litre,then quantity demanded is predicted to fall in the long run by

A)12% and total expenditure will fall.
B)24% and total expenditure will fall.
C)32% and total expenditure will fall.
D)24% and total expenditure will rise.
E)50% and total expenditure will rise.

Question 33

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

A)Compared with food,cornflakes have a lower price elasticity of demand because it is specifically defined.
B)Because cornflakes is food,but not all food is cornflakes,cornflakes would have a lower price elasticity of demand.
C)Food has a higher price elasticity of demand because it is a necessity.
D)Because cornflakes is food,cornflakes would have the same price elasticity of demand as food.
E)Food has a lower price elasticity of demand than cornflakes because it is more broadly defined.

Question 34

Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 1.7,and the price of the hamburger is currently $4.00.What will be the effect on quantity demanded and total expenditure on this chainʹs hamburgers if the price is increased to $6.00?

A)Quantity demanded will fall by 68% and total expenditure will decrease.
B)Quantity demanded will fall by 11.76% and total expenditure will decrease.
C)Quantity demanded will fall by 17% and total expenditure will increase.
D)Quantity demanded will fall by 1.7% and total expenditure will increase.
E)Quantity demanded will fall by 34% and total expenditure will decrease.

Question 35

Which of the following illustrates elastic demand?

A)A 10% increase in price causes a 5% decrease in quantity demanded.
B)A 10% increase in price causes a 20% decrease in quantity demanded.
C)a price elasticity of 0.8
D)a price elasticity of 1.0
E)A 10% increase in price causes a 10% reduction in quantity demanded.

Question 36

As the price for some product decreases from $4.00 to $3.00 per unit,quantity demanded increases from 400 to 500 units per day.For this segment of the demand curve,the price elasticity of demand is

A)7/9.
B)1.
C)9/7.
D)7.
E)9.

Question 37

A vertical demand curve shows that the price elasticity of demand is

A)zero.
B)unity.
C)less than one.
D)infinity.
E)not defined.

Question 38

Which of the following illustrates elastic demand?

A)A 5% increase in price causes a 2.5% decrease in quantity demanded.
B)A 5% increase in price causes a 10% decrease in quantity demanded.
C)a price elasticity of 0.8
D)a price elasticity of 1.0
E)A 10% increase in price causes a 10% reduction in quantity demanded.

Question 39

Suppose egg producers succeed in permanently raising the price of their product by 15%,and as a result the quantity demanded falls by 15% in the short run.In the long run we can expect the quantity demanded to fall by

A)0%.
B)15%.
C)between 0 and 15%.
D)more than 15%.
E)100%.

Question 40

With a downward-sloping straight-line demand curve,price elasticity of demand is

A)rising continuously with price increases.
B)decreasing continuously with price increases.
C)increasing to the midpoint of the curve and then decreasing.
D)constant everywhere on it.
E)indeterminate.

Question 41

Suppose the price of take-out pizza has been stable for many months at exactly $12.50 per pizza - and Olivier buys 6 pizzas per month at this price.When the price rises to $12.55 per pizza,Olivierʹs quantity demanded drops to zero.Apparently,Olivierʹs price elasticity of demand for take -out pizza is

A)-1.
B)0.
C)100
D)6.
E)higher than 10 000.

Question 42

If the total expenditure on photocopiers increases when the price of photocopiers rises,the price elasticity of demand is

A)greater than one (demand is elastic).
B)less than one (demand is inelastic).
C)equal to one (demand is unit elastic).
D)exactly zero.
E)not determinable from the information given.

Question 43

Elasticity of demand for prescription drugs is estimated to be much lower than elasticity of demand for one particular brand of over-the-counter cough medicine.One reason for this is

A)there are many substitutes for prescription drugs in the short run.
B)there are many substitutes for prescription drugs in the long run.
C)there are no substitutes for one brand of cough medicine in the short run.
D)there are no substitutes for one brand of cough medicine in the long run.
E)there are few substitutes for the broad category of prescription drugs while there are many substitutes for one brand of cough medicine.

Question 44

If price elasticity of demand for good X is equal to 0.4,then an increase in price will cause total expenditure on good X to

A)increase.
B)remain constant.
C)decrease.
D)fall to zero.
E)be negative.

Question 45

Suppose the current level of output of some good is 100 units.If market demand is inelastic at that quantity,total expenditure on this product would be higher if output was

A)maximized.
B)kept constant.
C)greater than 100 units.
D)less than 100 units.
E)minimized.

Question 46

Which of the following situations could explain why product X has a relatively high price elasticity of demand in the short run?

A)the price of product X is too low
B)the price of product X is too high
C)the prices of substitute products are constant
D)there are many substitutes for product X and consumers have an ability to switch quickly to those substitutes
E)there are few substitutes for product X in the short run

Question 47

If household expenditures on electricity remain constant when the price of electricity increases,the price elasticity for electricity is

A)greater than one (demand is elastic).
B)less than one (demand is inelastic).
C)one (demand is unit elastic).
D)exactly zero.
E)not determinable from the information given.

Question 48

If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is

A)greater than one (demand is elastic).
B)less than one (demand is inelastic).
C)equal to one (demand is unit elastic).
D)exactly zero.
E)not determinable from the information given.

Question 49

Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 0.75,and the price of the hamburger is currently $4.00.What will be the effect on quantity demanded and total expenditure on this chainʹs hamburgers if the price is increased to $6.00?

A)Quantity demanded will fall by 30%,and total expenditure will increase.
B)Quantity demanded will fall by 40%,and total expenditure will increase.
C)Quantity demanded will fall by 75%,and total expenditure will increase.
D)Quantity demanded will fall by 0.3%,and total expenditure will decrease.
E)Quantity demanded will fall by 0.4%,and total expenditure will decrease.

Question 50

A demand curve for which any price-quantity combination yields the same total expenditure reveals a price elasticity of demand equal to

A)infinity.
B)zero.
C)one.
D)some value greater than one but less than infinity.
E)not enough information to know.

Question 51

Every month Olivier buys exactly 6 take-out pizzas even though the price may fluctuate significantly.Apparently,Olivierʹs price elasticity of demand for take-out pizza is

A)-1.
B)0.
C)1.
D)6.
E)infinity.

Question 52

Rania is selling boxes of cookies door to door in her neighbourhood.At a price of $10 per box she sold 40 boxes per day.When the price was reduced to $4 per box she sold 100 boxes per day.Assuming that the demand conditions were unchanged,what is the price elasticity of demand for Raniaʹs cookies?

A)-1.7
B)0
C)0.85
D)1
E)1.17

Question 53

Suppose Statistics Canada reports that total income earned by Canadian barley farmers has declined as a result of a partial crop failure that has driven up the Canadian price of barley.We can conclude that the price elasticity of demand for barley in Canada is

A)greater than one.
B)exactly one.
C)less than zero.
D)less than one.
E)exactly zero.

Question 54

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

A)greater than one (demand is elastic).
B)less than one (demand is inelastic).
C)unity (demand is unit elastic).
D)exactly zero.
E)not determinable from the information given.

Question 55

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.Given the information this provides about price elasticity of demand,what is the predicted effect on total expenditure on tuition fees?

A)total expenditure will decrease
B)total expenditure will decrease by 7%
C)total expenditure will decrease by 3%
D)total expenditure will increase
E)total expenditure will remain constant

Question 56

When a productʹs price has an inverse relationship with total expenditure,then demand has a price elasticity of

A)zero.
B)less than one.
C)greater than one.
D)one.
E)inverse proportions.

Question 57

If the total expenditure on perfume increases when the price of perfume falls,the price elasticity of demand is

A)greater than one (demand is elastic).
B)less than one (demand is inelastic).
C)unity (demand is unit elastic).
D)exactly zero.
E)not determinable from the information given.

Question 58

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?

A)0
B)0.3
C)3
D)7
E)10

Question 59

The president of a major nickel-producing company says that an increase in the price of nickel would have no effect on the total amount spent on nickel.If this is true,the price elasticity of demand for nickel is

A)more than one.
B)exactly one.
C)less than zero.
D)infinitely elastic.
E)not calculable from the information given.

Question 60

If total expenditure on a product rises and falls directly with a productʹs price,then demand for this product has an elasticity of

A)zero.
B)less than one.
C)greater than one.
D)one.
E)direct proportions.

Question 61

Given that elasticity of supply changes over time,in the short run an increase in demand will generally cause

A)the price to rise above its long-run equilibrium value.
B)the price to rise to a level below its long-run equilibrium value.
C)the quantity exchanged to rise above its long -run equilibrium value.
D)both price and quantity exchanged to rise above their long -run equilibrium values.
E)supply to change.

Question 62

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantity supplied rises from 500 to 1000 units per month.The price elasticity of supply for this product is

A)0.33.
B)2.0.
C)2.5.
D)3.0.
E)1.0.

Question 63

Suppose a decrease in world demand for potash (used in the production of fertilizer)decreases the price from $400 per tonne to $240 per tonne.Annual Canadian production decreases from 12 million tonnes to 8 million tonnes.What is the elasticity of supply of Canadian potash?

A)0.4
B)0.8
C)0.75
D)1.0
E)1.25

Question 64

What does the following statement imply about price elasticity of demand? ʺAirlines experiencing higher traffic with reduced fares,but are struggling with fall in revenue.ʺ

A)demand for airline travel is price inelastic
B)elasticity of demand for airline travel is equal to one
C)elasticity of demand for airline travel is constant
D)elasticity of demand for airline travel is equal to zero
E)demand for airline travel is price elastic

Question 65

The elasticity of supply for some product will tend to be larger

A)the higher is the elasticity of demand for the product.
B)the lower is the elasticity of demand for the product.
C)the harder it is for firms to shift from the production of this product to another.
D)the easier it is for firms to shift from the production of this product to another.
E)the less time firms have to adjust to price changes.

Question 66

If the total revenue of producers rises for an initial cut in the price of their product but falls for further reductions in price,the price elasticity of demand for the product

A)declines as price falls.
B)is zero.
C)is unity.
D)rises as price falls.
E)rises and then falls.

Question 67

The elasticity of supply for a given commodity is calculated as

A)
B)
C)
D)
E)

Question 68

Suppose a decrease in world demand for potash (used in the production of fertilizer)decreases the price by 5 percent.Annual Canadian production decreases by 2 percent.What is the elasticity of supply of Canadian potash?

A)0.2
B)0.4
C)0.5
D)1.0
E)2.5

Question 69

What does the following statement imply about price elasticity of demand? ʺCherry producers in British Columbia experienced a healthy increase in revenues this year,despite a reduced harvest due to poor weather conditions.ʺ

A)elastic demand for B.C.cherries
B)elasticity of demand equal to one for B.C.cherries
C)inelastic demand for B.C.cherries
D)elasticity of demand equal to zero for B.C.cherries
E)infinite elasticity of demand for B.C.cherries

Question 70

What does the following statement imply about price elasticity of demand? ʺConsumers unfazed by 400 percent increase in price of table salt - grocers see no change in sales!ʺ

A)elasticity of demand for salt is equal to one
B)demand for salt is elastic
C)salt is too narrowly defined to determine price elasticity of demand
D)demand for salt is almost perfectly inelastic in the relevant price range
E)salt is too broadly defined to determine price elasticity of demand

Question 71

Suppose an increase in world demand for potash (used in the production of fertilizer)increases the price by 22 percent.Annual Canadian production increases by 33 percent.What is the elasticity of supply of Canadian potash?

A)0.22
B)0.33
C)0.67
D)1.0
E)1.5

Question 72

If the demand for some good fluctuates,but the supply curve is stable,then which of the following combinations would generally yield the greatest quantity fluctuations?

A)large demand fluctuations and inelastic supply
B)small demand fluctuations and unit elastic supply
C)small demand fluctuations and inelastic supply
D)small demand fluctuations and elastic supply
E)large demand fluctuations and elastic supply

Question 73

What does the following statement imply about price elasticity of demand? ʺGovernment tries to reduce cigarette consumption with an extra 50 cent tax per pack.Policy raises government revenue but fails to curb smoking.ʺ

A)demand for cigarettes is elastic
B)demand for cigarettes is inelastic
C)elasticity of demand for cigarettes is equal to one
D)elasticity of demand for cigarettes is close to infinity
E)elasticity of demand for cigarettes equals 0.5

Question 74

A value of infinity for the elasticity of supply of some product implies that

A)the supply curve is horizontal.
B)supply is very unresponsive to price.
C)the supply curve is vertical.
D)the product will be supplied at any price.
E)no product will be supplied at any price.

Question 75

Suppose an increase in world demand for potash (used in the production of fertilizer)increases the price from $285 per tonne to $315 per tonne.Annual Canadian production increases from 15 million tonnes to 17 million tonnes.What is the elasticity of supply of Canadian potash?

A)0.5
B)0.8
C)1.0
D)1.25
E)2.5

Question 76

An upward-sloping straight-line supply curve through the origin has an elasticity of

A)one.
B)greater than one.
C)less than one.
D)infinity.
E)zero.

Question 77

What does the following statement imply about price elasticity of demand? ʺAn unexpected spike in world oil prices leads to dramatic increase in revenue for the worldʹs oil producers.ʺ

A)short-run demand for oil is inelastic
B)short-run demand for oil is elastic
C)elasticity of demand for oil is equal to one
D)elasticity of demand for oil is constant
E)elasticity of demand for oil is equal to zero

Question 78

A value of zero for the elasticity of supply of some product implies that

A)the supply curve is horizontal.
B)supply is highly responsive to price.
C)the supply curve is vertical.
D)the product will not be supplied at any price.
E)there is no supply.

Question 79

Consider a firmʹs price elasticity of supply.If firmsʹ costs rise rapidly as output increases,the

A)supply curve will tend to be flat.
B)demand curve will tend to be steep.
C)elasticity of demand will tend to be low.
D)price elasticity of supply will tend to be high.
E)price elasticity of supply will tend to be low.

Question 80

If the demand for some good fluctuates,but supply is constant,then which of the following combinations would generally yield the greatest price fluctuations?

A)small demand fluctuations and elastic supply
B)large demand fluctuations and elastic supply
C)small demand fluctuations and inelastic supply
D)large demand fluctuations and inelastic supply
E)small demand fluctuations and a unit elastic supply