Deck 5: Elasticity

Question 1

Another term that could be used for elasticity is

A)sensitivity
B)utility
C)surplus
D)profit
E)slope

Answer 1

sensitivity

Question 2

The price elasticity of demand measures the

A)responsiveness of a good's price to a change in quantity demanded
B)adaptability of suppliers when a change in demand alters the price of a good
C)responsiveness of quantity demanded to a change in a good's price
D)adaptability of buyers when there is a change in demand
E)responsiveness of quantity supplied to a change in quantity demanded

Answer 2

responsiveness of quantity demanded to a change in a good's price

Question 3

A price elasticity of demand of 2 for a specific cola means that if the price increases 1 percent,the quantity demanded of the cola will decrease by 2 percent.

Answer 3

True

Question 4

The price elasticity of demand is

A)irrelevant to the determination of prices,incomes,and interest rates
B)indeterminate in most cases
C)the percentage change in price divided by the percentage change in quantity demanded
D)the percentage change in price with respect to the percentage change in quantity supplied
E)the percentage change in quantity demanded divided by the percentage change in price

Question 5

In measuring the sensitivity of demand,the

A)price and income elasticities refer to movements along the demand curve;other elasticities refer to shifts of the entire demand curve
B)price and cross-price elasticities analyze movements along the demand curve;other elasticities refer to shifts of the entire demand curve
C)income and cross-price elasticities refer to movements along the demand curve;price elasticity refers to shifts of the entire demand curve
D)price elasticity refers to movements along the demand curve;income and cross-price elasticities refer to shifts of the entire demand curve
E)income elasticity refers to movements along the demand curve;other elasticities refer to shifts of the entire demand curve

Question 6

If the price of a good increases from $20 to $25 and the quantity demanded declines from 15 to 10 units of the good,the price elasticity of demand is 5.

Question 7

The sensitivity of one economic variable to changes in another variable is known as

A)the variability coefficient
B)elasticity
C)the sensitivity coefficient
D)the cross-variability coefficient
E)the law of demand

Question 8

The price elasticity of demand is important to firms because

A)it explains the relationship between income and demand for the goods they sell
B)it shows how price changes affect total expenditures on the goods they sell
C)the law of demand suggests that elasticity falls as total expenditures continuously rises
D)it helps identify the equilibrium price and quantity in the market
E)it relates price to supply

Question 9

Suppose that a local supermarket sells apples and oranges for 50 cents apiece,and at these prices is able to sell 100 apples and 200 oranges per week.One week,the supermarket lowered the price per apple to 40 cents and sold 120 apples.The next week,they lowered the price per orange to 40 cents (after raising the price per apple back to 50 cents)and sold 240 oranges.These results imply that the

A)price elasticity of apples is lower than the price elasticity of oranges
B)price elasticity of apples is higher than the price elasticity of oranges
C)demand for apples is more price sensitive than the demand for oranges
D)demand for oranges is more price sensitive than the demand for apples
E)price elasticities of demand for apples and oranges are the same over these price ranges

Question 10

If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded,then the price elasticity of demand is 2.00.

Question 11

If the price elasticity of demand for Cheer detergent is 3.0,then a

A)12 percent drop in price leads to a 36 percent rise in the quantity demanded
B)12 percent drop in price leads to a 4 percent rise in the quantity demanded
C)$1,000 drop in price leads to a 3,000-unit rise in the quantity demanded
D)$1,000 drop in price leads to a 333-unit rise in the quantity demanded
E)12 percent rise in price leads to a 36 percent rise in the quantity demanded

Question 12

The price elasticity of demand is the

A)percentage change in price divided by the percentage change in quantity demanded
B)average change in price divided by the average change in quantity demanded
C)percentage change in quantity demanded divided by the percentage change in price
D)average change in price divided by the average change in quantity demanded.
E)percentage change in quantity demanded divided by the average change in price.

Question 13

If a 20 percent decrease in the price of chicken results in a 10 percent increase in the quantity demanded,the price elasticity of demand has a value of

A)0.5
B)2
C)1
D)0.1
E)none of these

Question 14

Figure 5-1 shows the prices of two services offered by Earl's Barber Shop and the resulting quantities demanded by customers.In this example,the price elasticity of demand for manicures (using the midpoint formula)is

A)1
B)2
C)3
D)0.5
E)0.4

Question 15

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

Question 16

If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded,then the price elasticity of demand is 0.50.

Question 17

The concept of elasticity is used to

A)indicate the economy's ability to rebound from a recession
B)measure the robustness of a variable
C)measure the sensitivity of one variable to changes in another
D)measure price changes
E)measure income changes

Question 18

When calculating the price elasticity of demand,we assume that the price of the good changes while all other variables affecting

A)demand except buyers' incomes remain constant
B)demand except the population size remain constant
C)demand and supply remain constant
D)supply remain constant
E)demand remain constant

Question 19

A $1.00 increase in the price of a restaurant meal results in a drop in quantity demanded of 5 meals.Which of the following statements is correct?

A)The slope of the demand curve is -1/5;there is insufficient information to determine the price elasticity of demand.
B)The price elasticity of demand is -1/5;there is insufficient information to determine the slope of the demand curve.
C)Both the slope of the demand curve and the price elasticity of demand are equal to -1/5.
D)There is insufficient information to determine either the slope of the demand curve or the price elasticity of demand.
E)The slope of the demand curve is -1/5;the price elasticity of demand is 5.

Question 20

Figure 5-1 shows the prices of two services offered by Earl's Barber Shop and the resulting quantities demanded by customers.In this example,the price elasticity of demand for haircuts (using the midpoint formula)is

A)1
B)1.8
C)3.5
D)2.25
E)0.5

Question 21

In Figure 5-3,the price elasticity of demand equals __________ between points T and U and equals __________ between points V and W.

A)0.33;1.86
B)0.54;3
C)3;0.54
D)1.86;0.33
E)2;2

Question 22

Figure 5-4 shows the demand schedule for hockey pucks.What is the price elasticity of demand when the price changes from $4 per puck to $5 per puck?

A)0.33
B)1.00
C)1.15
D)3.00
E)none of these

Question 23

Which of the following statements about straight-line demand curves is true?

A)The price elasticity of demand becomes larger in absolute value as price falls.
B)The price elasticity of demand becomes smaller in absolute value as price falls.
C)The price elasticity of demand is constant along the curve.
D)The price elasticity of demand and the slope of the demand curve are the same.
E)Demand is price elastic everywhere along the curve.

Question 24

If the demand curve is a straight line and has the normal negative slope,then as quantity demanded increases,demand

A)becomes more elastic
B)becomes more inelastic
C)is unitary elastic
D)rises and then falls
E)is an inverse function of supply

Question 25

Moving downward along a straight-line demand curve,the absolute value of the price elasticity of demand

A)always rises
B)rises until the midpoint of the curve is reached,and then falls
C)falls until the midpoint of the curve is reached,and then rises
D)always falls
E)falls from 1 to 0

Question 26

Figure 5-2

Consider demand curve D in Figure 5-2.Between points F and G,the price elasticity of demand is

A)1
B)0.5
C)2
D)0.2
E)none of these

Question 27

If the demand curve is a straight line with a negative slope,then demand is more elastic at higher prices than lower prices.

Question 28

Suppose that when the price of aspirin rises from $2 to $3 per bottle,the quantity demanded falls from 800 bottles per day to 700 bottles per day.Over this range,the demand for aspirin is

A)elastic
B)unitary elastic
C)perfectly elastic
D)inelastic
E)perfectly inelastic

Question 29

In Figure 5-3,the price elasticity of demand between points T and U is the same as between points V and W.

Question 30

The slope of the demand curve and the price elasticity of demand are

A)basically the same thing
B)determined by supply
C)are derived from production and distribution costs
D)different because slope is based on absolute changes and elasticity is based on percentage changes
E)implicit in the shape of the supply curve

Question 31

The elasticity approach to measuring the sensitivity of quantity demanded to changes in price differs from using the slope because the elasticity approach calculates the ratio of the

A)absolute change in price to the absolute change in quantity demanded
B)absolute change in quantity demanded to the percentage change in price
C)absolute change in quantity demanded to the percentage change in price.
D)percentage change in quantity demanded to the percentage change in price.
E)average change in price to the average change in quantity demanded.

Question 32

The price elasticity of demand is usually equal to the slope of the demand curve.

Question 33

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold the same amount of milk per week (165 gallons).Since everything else remained the same,we would say the

A)demand for milk is perfectly elastic
B)demand for milk is elastic
C)demand for milk is perfectly inelastic
D)demand for milk is unitary elastic
E)law of supply does not apply in this situation

Question 34

Which of the following statements concerning the slope and price elasticity of demand along a straight-line demand curve is correct?

A)Slope measures the change in quantity resulting from a one-dollar change in price.
B)Elasticity measures the percent change in price resulting from a one-percent change in quantity demanded.
C)Slope measures the dollar change in price for a one-unit change in quantity demanded.
D)Elasticity measures the unit change in quantity demanded resulting from a one-dollar change in price.
E)Slope measures the percent change in price resulting from a one-percent change in quantity demanded.

Question 35

Figure 5-1 shows the prices of two services offered by Earl's Barber Shop and the resulting quantities demanded by customers.Suppose that the current price for a haircut is $20 and the current price for a manicure is $12,and Earl has a sale of $4 off the price of either a haircut or a manicure.In this example,

A)haircuts have the smaller absolute change in quantity demanded and the more elastic demand
B)Earl can earn more revenue from manicures at the lower price
C)Earl should decrease the number of spaces in his shop allocated to haircuts
D)the demand for haircuts is unitary elastic
E)the demand for haircuts is inelastic

Question 36

Figure 5-4 shows the demand schedule for hockey pucks.What is the price elasticity of demand when the price changes from $2 per puck to $1 per puck (using the midpoint formula)?

A)0.33
B)0.15
C)3.00
D)1.00
E)none of these

Question 37

Figure 5-2

In Figure 5-2,compare demand curve D between points F and G to demand curve D' between points J and K.Which of the following statements is correct?

A)Both demand curves have the same slope,but D' is more elastic in the $2 to $3 range.
B)Both demand curves have the same slope,but D' is less elastic in the $2 to $3 range.
C)Both demand curves have the same price elasticity of demand,but D' has a larger slope.
D)Both demand curves have the same price elasticity of demand,but D' has a smaller slope.
E)Both demand curves have the same slope and the same value for the price elasticity of demand.

Question 38

Daniel's consumption of pizzas drops from 6 per week to 4 per week when the price rises from $9 to $11.His price elasticity of demand for pizza equals

A)0.5
B)1
C)2
D)0.08
E)1.7

Question 39

In Figure 5-5,the slope of the demand curve

A)has a constant value of -2
B)is higher between points T and U than between points V and W
C)is lower between points T and U than between points V and W
D)matches the value of the price elasticity of demand at each point
E)is lower than the value of the price elasticity of demand at every point

Question 40

If the price of a certain brand of sneakers falls from $27.50 to $22.50,and the quantity demanded by consumers increases from 15 to 25 pairs per week,then the price elasticity of demand is

A)0.25
B)1.00
C)2.75
D)1.50
E)2.50

Question 41

If demand is perfectly elastic,then

A)the demand curve is a horizontal line
B)supply is perfectly inelastic
C)supply is perfectly elastic
D)the demand curve is a vertical line
E)the demand curve is downward sloping

Question 42

Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year).At a price of $9 per ticket,her

A)demand is inelastic
B)demand is perfectly elastic
C)demand is elastic
D)total expenditure is being maximized
E)demand is perfectly inelastic

Question 43

If the price of food falls by 10 percent and the quantity sold increases by 5 percent,then the price elasticity of demand in that range equals

A)2,and demand is elastic
B)0.5,and demand is elastic
C)2,and demand is inelastic
D)0.5,and demand is inelastic
E)15,and demand is elastic

Question 44

Demand is said to be price inelastic when the coefficient of price elasticity of demand is

A)greater than +1
B)between 0 and +1
C)zero
D)infinity

Question 45

Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year).At a price of $9 per ticket,the price elasticity of demand is

A).5
B)1.0
C)1.5
D)2
E)cannot tell from information given

Question 46

Figure 5-8 shows the demand schedule for hockey pucks.At which price is demand the least price elastic?

A)$1
B)$2
C)$3
D)$4
E)$5

Question 47

If demand is elastic,then

A)the percentage change in quantity demanded is larger in absolute value than the percentage change in price
B)supply is inelastic
C)prices can neither rise nor fall
D)the percentage change in quantity demanded is smaller in absolute value than the percentage change in price
E)supply is elastic

Question 48

If the percentage change in quantity demanded is greater (in absolute value)than the percentage change in price,then demand

A)determines supply
B)is indeterminate
C)is elastic
D)is inelastic
E)is unit elastic

Question 49

If the demand curve is a vertical line,then

A)demand is perfectly elastic
B)demand is perfectly inelastic
C)demand is unit elastic
D)demand is determined by supply
E)supply is a horizontal line

Question 50

Figure 5-6 shows the demand curve for chicken.Between points L and M,the price elasticity of demand is

A)0.44,and demand is elastic
B)0.44,and demand is inelastic
C)2.25,and demand is elastic
D)2.25,and demand is inelastic
E)0.028,and demand is inelastic

Question 51

When a one-percent change in price is accompanied by a larger percent change in quantity demanded,

A)demand is inelastic
B)supply is elastic
C)the good is a normal good
D)the good is an inferior good
E)demand is elastic

Question 52

If the percentage change in quantity demanded divided by the percentage change in price equals 1,then

A)supply is inelastic
B)supply is elastic
C)demand is elastic
D)demand is inelastic
E)demand is unit elastic

Question 53

If demand is perfectly inelastic,

A)the percent change in quantity demanded divided by the percent change in price is zero
B)the demand curve is a vertical line
C)supply is perfectly inelastic too
D)consumers have power over prices
E)the percentage change in price divided by the percentage change in quantity demanded is zero

Question 54

If the numerical value of the price elasticity of demand is 3,then a one-percent change in price will cause a(n)

A)larger percentage change in quantity demanded,so demand is elastic
B)larger percentage change in quantity demanded,so demand is inelastic
C)smaller percentage change in quantity demanded,so demand is elastic
D)smaller percentage change in quantity demanded,so demand is inelastic
E)equal percentage change in quantity demand,so demand is unitary elastic

Question 55

Figure 5-8 shows the demand schedule for hockey pucks.At which price is demand the most price elastic?

A)$1
B)$2
C)$3
D)$4
E)$5

Question 56

If a change in price does not lead to any change in revenue,then demand over that range of prices is inelastic.

Question 57

If the percentage change in quantity demanded is smaller (in absolute value)than the percentage change in price,then demand is

A)inelastic
B)elastic
C)unit elastic
D)determined by supply
E)inadequate compared to supply

Question 58

If the demand curve is a horizontal line,

A)demand is perfectly elastic
B)demand is perfectly inelastic
C)demand is unitary elastic
D)demand is relatively inelastic
E)total expenditure is maximized

Question 59

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold 33% less milk.Since everything else remained the same,we would say the

A)demand for milk is perfectly elastic
B)demand for milk is elastic
C)demand for milk is perfectly inelastic
D)demand for milk is unitary elastic
E)law of supply does not apply in this situation

Question 60

Celia buys 24 gallons of gasoline per month when the price is $2 per gallon,but only 16 gallons if the price rises to $3 per gallon.Within this range,her demand for gasoline is

A)unitary elastic
B)perfectly inelastic
C)perfectly elastic
D)inelastic
E)elastic

Question 61

If demand for a good is represented by curve D in Figure 5-10,then an increase in supply of the good will cause

A)the equilibrium quantity to rise,but seller's total revenue to fall
B)the equilibrium quantity to fall,but seller's total revenue to rise
C)both the equilibrium quantity and seller's total revenue to fall
D)the equilibrium quantity to rise,but seller's total revenue will not change
E)both the equilibrium quantity and seller's total revenue to rise

Question 62

Figure 5-9 shows Sally's demand for movie theater tickets (quantity of movies per year).If the price per ticket fell from $8 to $7,

A)there would be no change in Sally's total expenditure on movie tickets
B)Sally would spend less money on movie tickets
C)Sally would spend more money on movie tickets
D)Sally's demand curve would shift to the left
E)the supply curve would shift to the right

Question 63

Suppose a local bookstore notices that a 2 percent increase in book prices leads to a 2 percent decrease in the number of books sold.Which of the following is true?

A)Demand for books is price elastic.
B)The store's sales revenue did not change.
C)Demand for books is price inelastic.
D)Demand for books is perfectly inelastic.
E)The bookstore could increase revenue by further lowering prices.

Question 64

If demand is price inelastic,a decrease in price

A)raises total revenue to the seller
B)raises total expenditure on the good,but not total revenue to the seller
C)reduces total revenue to the seller
D)leaves total revenue to the seller unchanged
E)leaves total expenditure on the good unchanged

Question 65

Demand for goods in broader category definitions,such as "beverages",is usually less elastic than demand for more narrowly defined goods,such as "diet colas."

Question 66

Which of the following goods is likely to have the most elastic demand over the relevant range of prices?

A)insulin
B)eggs
C)milk
D)Pepsi Cola
E)gasoline

Question 67

If the demand for a good is price inelastic,a decrease in total revenue from the good would result from a(n)

A)increase in price
B)decrease in quantity demanded
C)favorable shift in tastes and preferences
D)decrease in price
E)increase in consumers' incomes

Question 68

A public university knows that demand from potential students is elastic.If the university wants to increase tuition revenue,it should

A)raise its tuition rate
B)hold its tuition rate constant and increase faculty salaries
C)increase its financial aid
D)lower its tuition rate
E)increase its enrollment

Question 69

If demand is perfectly inelastic,a decrease in price results in a(n)

A)decrease in seller's total revenue
B)increase in total seller's expenditure
C)increase in expenditure on the good,but a decrease in revenue to the seller
D)unfavorable shift in tastes and preferences
E)increase in total revenue to the seller

Question 70

If demand is price inelastic,

A)price and total revenue change in opposite directions
B)a seller should decrease the price to increase total revenue
C)too few goods are being produced from society's point of view
D)price and total revenue change in the same direction
E)the market can never be in equilibrium

Question 71

Consider a good with a price elasticity equal to 1 at every point on its demand curve.Which of the following statements is correct?

A)Total revenue always rises exactly in proportion to a drop in the price.
B)Total revenue always rises exactly in proportion to a rise in the price.
C)Total revenue does not change if the price changes.
D)Total revenue drops to zero whenever the price rises.
E)Total revenue always doubles if the price drops.

Question 72

If demand is unitary elastic,a price decrease results in

A)an increase in total seller's total revenue
B)no change in total seller's total revenue
C)a decrease in total expenditure on the good
D)a decrease in quantity demanded of the good
E)an increase in supply of the good

Question 73

Perfect planting and harvesting weather results in a record high crop of wheat.If wheat growers experience an increase in total sales revenue,then the demand for wheat must be

A)price-inelastic
B)unitary elastic
C)perfectly inelastic
D)price-elastic
E)perfectly elastic

Question 74

If demand is price elastic,a decrease in seller's total revenue would result from a(n)

A)decrease in price
B)increase in quantity demanded
C)increase in price
D)decrease in income for an inferior good
E)increase in total cost to the seller

Question 75

Which of the following goods is likely to have the least elastic demand over the relevant range of prices?

A)insulin
B)eggs
C)milk
D)Pepsi Cola
E)gasoline

Question 76

As a result of heavy spring rains in the Midwest,the corn crop declined sharply.If corn growers experienced an increase in sales revenue,the demand for corn must be

A)price elastic
B)price inelastic
C)unitary elastic
D)perfectly inelastic
E)perfectly elastic

Question 77

If demand is price elastic,a decrease in price results in a(n)

A)decrease in total expenditure on the good
B)unfavorable shift in tastes and preferences
C)decrease in total cost for the seller
D)increase in supply of the good
E)increase in total revenue to the seller

Question 78

If a price decrease results in no change in seller's total revenue then

A)supply determined demand
B)supply is unresponsive to demand
C)demand is elastic
D)demand is inelastic
E)demand is unitary elastic

Question 79

If demand for a good is represented by curve D" in Figure 5-10,then an increase in supply of the good will cause the equilibrium

A)price to fall,but revenue will not change
B)quantity to fall,but revenue to rise
C)quantity to rise,but revenue will not change
D)price to rise,but revenue to fall
E)price to fall.Seller's total revenue could rise or fall depending on the price elasticity of demand

Question 80

If demand for a good is represented by curve D' in Figure 5-10,then a decrease in supply of the good will cause

A)both the equilibrium price and revenue to rise
B)both the equilibrium price and revenue to fall
C)the equilibrium price to rise,but revenue to fall
D)the equilibrium price to fall,but revenue to rise
E)neither the equilibrium price nor revenue to change