Deck 5: Elasticities of Demand and Supply

Question 1

Suppose the price of a box of cereal rises from $4 to $6.Using the midpoint method, what is the percentage change in price?

A)50 percent
B)40 percent
C)33 percent
D)67 percent
E)None of the above answers is correct.

Answer 1

B

Question 2

When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is

A)inelastic.
B)unit elastic.
C)elastic.
D)irrelevant.
E)undefined.

Answer 2

C

Question 3

Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month.Using the midpoint formula, the ________ percent change in price lead to a ________ percent change in the quantity demanded.

A)12.5; 10.5
B)13.3; 10.0
C)11.8; 11.1
D)8.0; 9.5
E)None of the above answers are correct.

Answer 3

A

Question 4

Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic.As a result, a 7 percent increase in the price charged by the owner of this stand leads to

A)zero peaches sold by this stand.
B)no change in the quantity demanded at this stand.
C)a 7 percent decrease in the quantity demanded at this stand.
D)a 7 percent decrease in demand at this stand.
E)a virtually infinite increase in the quantity demanded at this stand.

Question 5

If the price of a six-pack of Pepsi falls from $4 to $3 and the quantity purchased increases 80 percent, then demand is

A)inelastic.
B)elastic.
C)unit elastic.
D)perfectly inelastic.
E)perfectly elastic.

Question 6

The price elasticity of demand is a measure of

A)the equilibrium price of a product.
B)buyers' responsiveness to changes in the price of a product.
C)the amount of a product purchased when income increases.
D)whether a product is a substitute or a complement.
E)how much a change in demand affects the equilibrium price.

Question 7

Suppose the local university charges $85 per credit hour.If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price?

A)8.99 percent
B)8.00 percent
C)9.41 percent
D)8.62 percent
E)9.12 percent

Question 8

When the percentage change in the quantity demanded is less than the percentage change in price, then demand is

A)inelastic.
B)unit elastic.
C)elastic.
D)irrelevant.
E)undefined.

Question 9

If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is

A)elastic.
B)unit elastic.
C)inelastic.
D)perfectly unit elastic.
E)perfectly elastic.

Question 10

If the price of a good rises, then moving along a demand curve the percentage change in the quantity demanded will be

A)positive.
B)negative.
C)zero.
D)either positive, negative, or zero depending on how the demand curve shifted.
E)undefined.

Question 11

Suppose the Chicago Bears football team raises ticket prices by 13 percent and as a result the quantity of tickets demanded decreases by 21 percent.This response means that the demand for Bears tickets is

A)inelastic.
B)elastic.
C)unit elastic.
D)perfectly inelastic.
E)perfectly elastic.

Question 12

If the demand for a good is elastic, then

A)people do not change the quantity they demand when the price of the good changes.
B)a change in price leads to a smaller percentage change in the quantity demanded.
C)people substantially decrease the quantity of the good they buy if its price increases by a small percentage.
D)a change in the quantity demanded is smaller than the change in price.
E)the quantity demanded divided by the price exceeds 1.00.

Question 13

Using the midpoint method, if the price of an airline ticket from Orlando to Pittsburgh falls from $275 to $238, the percentage change in price is

A)1442 percent.
B)14.42 percent.
C)15.54 percent.
D)13.45 percent.
E)68.00 percent.

Question 14

The price elasticity of demand measures the extent to which the quantity demanded changes when

A)the price of the good changes.
B)the price of a related good changes.
C)the expected future price of a good changes.
D)consumer preferences change.
E)both the demand and supply of the good change.

Question 15

If the percentage change in price is 10 percent and the demand is elastic, then the percentage change in the quantity demanded

A)is greater than 0 percent but less than 10 percent.
B)is larger than 10 percent.
C)equals 0 percent.
D)equals 10 percent.
E)More information is needed to determine the magnitude of the change in the quantity demanded.

Question 16

To determine the price elasticity of demand, we

A)need information on consumers' incomes.
B)need to know how much is available.
C)compare the percentage change in the quantity demanded to the percentage change in the price.
D)compare the change in the quantity to the change in price.
E)divide the quantity by the price.

Question 17

If we ignore the negative or positive sign, the midpoint method of calculating a percentage change in price between two points on a demand curve results in

A)a smaller percentage change if the price rises than if it falls.
B)the same percentage, regardless of whether the price increases or decreases.
C)the price elasticity of demand.
D)the price elasticity of supply.
E)a higher percentage change if the price rises than if it falls.

Question 18

The price elasticity of demand measures which of the following?

A)the slope of the demand curve
B)the rate at which demand changes when price changes
C)how responsive the quantity demanded is to changes in price
D)the percentage-slope of the demand curve
E)None of these correctly defines what price elasticity of demand measures.

Question 19

The price elasticity of demand measures the ________ that results from a ________.

A)change in quantity demanded; change in price
B)change in price; change in the quantity demanded
C)percentage change in price; percentage change in the quantity demanded
D)percentage change in the quantity demanded; percentage change in price
E)percentage change in the quantity demanded; change in price

Question 20

The elasticity of demand is used to

A)determine if consumers will or will not buy a product.
B)measure how responsive consumers are to a change in price.
C)determine in what direction the demand curve shifts if income changes.
D)find the market equilibrium.
E)determine if a change in price results in a shortage or a surplus.

Question 21

If the price elasticity of demand for razors is 0.32, the demand for razors is

A)elastic.
B)unit elastic.
C)inelastic.
D)perfectly inelastic.
E)perfectly elastic.

Question 22

If a substitute good is easy to find, then demand for a good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.
E)Substitutes don't have any effect on elasticity.

Question 23

Of the following, which good has the most elastic demand?

A)food
B)breakfast food
C)cereal
D)Post Raisin Bran
E)Post Raisin Brand purchased at a Safeway grocery store

Question 24

If the percentage change in the quantity demanded is not zero but is less than the percentage change in the price, demand is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly elastic.
E)perfectly inelastic.

Question 25

Which of the following statements is correct?

A)The demand for New Balance shoes is more elastic than the demand for shoes in general.
B)The demand for salt is very elastic.
C)The demand for luxuries is less elastic than the demand for necessities.
D)The demand for a narrowly defined good is less elastic than the demand for a more broadly defined good.
E)The larger the proportion of income spent on a good, the smaller the elasticity of demand.

Question 26

Perfectly inelastic demand means that consumers

A)are willing to buy any quantity of the good at a given price, but none at higher prices.
B)decrease their consumption as price rises.
C)increase their consumption as price rises.
D)will buy a certain quantity, regardless of price.
E)will buy a huge, almost infinite amount more, if the price falls just a little.

Question 27

If a product is narrowly defined, it is likely to

A)have many substitutes and therefore its demand is elastic.
B)have few substitutes, and therefore its demand is less elastic.
C)be unique, and therefore its demand is inelastic.
D)be unique and have many substitutes.
E)have a larger proportion of income spent on it.

Question 28

One reason why the demand for gasoline is inelastic is because

A)substitutes for gas abound.
B)substitutes for gas are hard to find.
C)gasoline is a luxury item.
D)people have a long time to shop around for automobiles that use less gas.
E)buses run on diesel fuel rather than gasoline.

Question 29

If a good has many close substitutes, then its demand is most likely

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.
E)elastic or inelastic depending on whether the price of the good is increasing or decreasing.

Question 30

Which of the following does NOT influence the price elasticity of demand?

A)the amount by which the demand curve shifts when the price of another good changes
B)the number of substitutes available to consumers
C)the price of the good relative to total income
D)the time period buyers have to respond to a price change
E)whether the good is a necessity or a luxury

Question 31

As more time passes, the price elasticity of gasoline

A)increases.
B)decreases.
C)stays the same.
D)becomes perfectly inelastic.
E)becomes perfectly elastic.

Question 32

Suppose the demand for rescue services in our national parks is perfectly inelastic.This fact would mean that a 31 percent increase in rescue fees leads to

A)a 31 percent decrease in the quantity demanded.
B)a 31 percent increase in demand.
C)a 31 percent decrease in demand.
D)no change in the quantity demanded.
E)a decrease in the quantity demanded to 0 rescues.

Question 33

When the percentage change in the quantity demanded equals the percentage change in price, then demand is

A)inelastic.
B)unit elastic.
C)elastic.
D)irrelevant.
E)undefined.

Question 34

All of the following statements are true EXCEPT

A)the demand for food is less elastic than the demand for a Hawaiian vacation.
B)the demand for clothing is less elastic than the demand for blue jeans.
C)the demand for gasoline is more elastic the longer the time elapsed.
D)the smaller the proportion of income spent on a good, the more inelastic demand will be.
E)the demand for Nike running shoes is less elastic than the demand for shoes.

Question 35

The demand for a good is more elastic if the

A)good is a necessity.
B)good has few substitutes.
C)good is narrowly defined.
D)supply of the good is plentiful.
E)Both answers B and C are correct.

Question 36

Suppose the San Francisco 49ers lower ticket prices by 15 percent and as a result the quantity of tickets demanded increases by 10 percent.This set of results shows that San Francisco 49ers tickets have

A)an inelastic demand.
B)an elastic demand.
C)a unit elastic demand.
D)an inelastic supply.
E)an elastic supply.

Question 37

The longer the time that has elapsed since the price of a good changed, the

A)more elastic the demand for that good.
B)steeper the demand curve.
C)less elastic the demand for that good.
D)smaller the amount of that good bought.
E)fewer substitutes available for the good.

Question 38

Suppose a local photographer increases his prices by 8 percent and quantity demanded decreases by the same percentage.This set of facts indicates that the demand for his services is

A)inelastic.
B)elastic.
C)unit elastic.
D)perfectly elastic.
E)perfectly inelastic.

Question 39

The price elasticity of demand for Red Delicious apples, a certain type of apple, is likely

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.
E)unit elastic.

Question 40

If the price elasticity of demand for opera tickets in Orlando is 1.00, then the demand for opera tickets in Orlando is

A)unit elastic.
B)elastic.
C)perfectly inelastic.
D)inelastic.
E)perfectly elastic.

Question 41

The demand for a necessity generally is

A)very elastic.
B)infinitely elastic.
C)unaffected by income.
D)inelastic.
E)unit elastic.

Question 42

If a 10 percent price increase generates a 20 percent decrease in quantity demanded, then demand is

A)elastic.
B)perfectly inelastic .
C)perfectly elastic.
D)inelastic.
E)unit elastic.

Question 43

If a 2 percent change in price leads to a ________ percent change in the quantity demanded, then demand is ________.

A)2; elastic
B)1; unit elastic
C)3; inelastic
D)4; elastic
E)0; perfectly elastic

Question 44

The demand for necessities generally is ________ the demand for luxury goods.

A)as elastic as
B)more elastic than
C)less elastic than
D)flatter than
E)not comparable to

Question 45

If the price elasticity of demand for a good is 2, then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.

A)increases; 20
B)decreases; 2
C)decreases; 10
D)decreases; 20
E)increases; 8

Question 46

Demand is price inelastic if ________ percentage change in the price leads to a ________ percentage change in the quantity demanded.

A)a small; large
B)a large; small
C)any; large
D)Both answers A and B are correct.
E)None of the above answers is correct.

Question 47

The price of furnace filters increased by 5 percent and the quantity demanded did not change.The price elasticity of demand for furnace filters is

A)perfectly inelastic.
B)inelastic.
C)elastic.
D)unit elastic.
E)perfectly elastic.

Question 48

What is the formula for the price elasticity of demand? The percentage change in the

A)quantity demanded divided by the percentage change in the price of a substitute or complement.
B)quantity supplied divided by the percentage change in price.
C)quantity demanded divided by the percentage change in price.
D)quantity demanded divided by the percentage change in income.
E)equilibrium quantity demanded divided by the equilibrium price.

Question 49

A product's price elasticity of demand is likely to be greater

A)if it only has a few substitutes.
B)if consumers spend a small proportion of income on the product.
C)the less time consumers have to adjust to price changes.
D)if the product is a luxury good rather than a necessity.
E)Both answers C and D are correct.

Question 50

You are more sensitive to a change in price if you

A)spend a lot of your income on the good.
B)spend a small percentage of your income on the good.
C)buy very little of the good.
D)do not buy the good regularly.
E)have a very inelastic demand for the good.

Question 51

The demand for luxury suites at basketball games is more elastic if

A)these suites are a necessity.
B)these suites are a luxury item.
C)few close substitutes exist for these suites.
D)basketball fans have little time to look for alternative suites.
E)poorer fans cannot afford luxury suites.

Question 52

If a 30 percent price increase generates a 20 percent decrease in quantity demanded, then demand is

A)inelastic.
B)elastic.
C)unit elastic.
D)perfectly elastic.
E)perfectly inelastic.

Question 53

If a good is a necessity, it has ________ substitutes and its demand is ________.

A)poor; elastic
B)poor; inelastic
C)many; elastic
D)many; inelastic
E)many; precisely unit elastic

Question 54

When the price of tacos rise 4 percent, the quantity demanded decreases 10 percent.What is the price elasticity of demand for tacos?

A)40.0
B)25.0
C)0.4
D)2.5
E)10.0

Question 55

Demand for a product tends to be more elastic the longer the time period considered because

A)sellers have more time to expand production.
B)buyers have more time to search for substitutes.
C)price increases over time make the price larger relative to buyers' incomes.
D)the inverse relationship between the price and the quantity demanded weakens over time.
E)buyers get used to the new price.

Question 56

The long-run price elasticity of demand for electricity is ________ the short-run price elasticity of demand for electricity.

A)greater than
B)less than
C)equal to
D)not comparable to
E)unrelated to

Question 57

If a 2 percent change in price leads to a ________ percent change in the quantity demanded, then demand is ________.

A)2; elastic
B)1; unit elastic
C)3; inelastic
D)1; inelastic
E)0; perfectly elastic

Question 58

We calculate the price elasticity of demand as the

A)ratio of the percentage change in the quantity demanded to the percentage change in price.
B)change in quantity divided by the change in price.
C)ratio of the percentage change in the price to the percentage change in quantity.
D)percentage change in the quantity demanded divided by the percentage change in income.
E)equilibrium quantity divided by the equilibrium price.

Question 59

If a 10 percent price increase generates a 10 percent decrease in quantity demanded, then demand is

A)unit elastic.
B)elastic.
C)perfectly inelastic.
D)perfectly elastic.
E)inelastic.

Question 60

Suppose the price of a ticket to a Lenny Kravitz concert is $41 and at that price, the quantity of tickets demanded is 17,000 per concert.Using the midpoint method of calculating percentage changes, if Mr.Kravitz raises the price to $48 and the quantity demanded decreases to 16,000, the price elasticity of demand for his concert tickets is

A)15.73.
B)6.06.
C)1.00.
D)0.39.
E)0.93.

Question 61

If a 4 percent change in the price of a good leads to a 3 percent change in quantity demanded, the price elasticity of demand equals

A)1.33.
B)0.75.
C)4.00.
D)3.44.
E)None of the above answers are correct.

Question 62

When the price of a burrito increases from $2 to $4, the quantity demanded decreases from 50 to 40.Using the midpoint method, the price elasticity of demand equals

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

Question 63

In the mid-1970s, Newsweek magazine reported that the city of Atlanta lowered its city bus fares from 40 cents to 15 cents a passenger.The number of bus riders increased by 15 percent after the fare cut.This set of results indicates that the demand for bus rides in Atlanta at that time was

A)unit elastic.
B)perfectly inelastic.
C)elastic.
D)inelastic.
E)perfectly elastic.

Question 64

In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $6 to $5 is equal to

A)2.50.
B)1.63.
C)1.10.
D)0.91.
E)1.00.

Question 65

If the price elasticity of demand for a product is 2.5, then a price increase of 1.5 percent decreases the quantity demanded by

A)1.55 percent.
B)3.50 percent.
C)5.00 percent.
D)3.75 percent.
E)1.00 percent.

Question 66

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month.Using the midpoint method, the price elasticity of demand equals

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

Question 67

The data in the table above give two points on the demand curve for pizza.Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the price elasticity of demand?

A)0.5
B)0.6
C)0.9
D)2.1
E)8.6

Question 68

The data in the table above give two points on the demand curve for pizza.Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in the quantity demanded?

A)22.2 percent
B)10.0 percent
C)15.5 percent
D)5.2 percent
E)25 percent

Question 69

A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125.Using the midpoint method, what is the price elasticity of demand?

A)0.75
B)1.00
C)1.25
D)0.50
E)0.0

Question 70

In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $7 to $6 is equal to

A)2.50.
B)1.63.
C)0.40.
D)0.62.
E)1.00.

Question 71

A 10 percent increase in price leads to a 20 percent decrease in the quantity demanded.The price elasticity of demand is equal to

A)0.5.
B)1.0.
C)2.0.
D)20.0.
E)10.0.

Question 72

During last year the price of regular unleaded gasoline in Oakland, California increased 11.0 percent.If the price elasticity of demand for gasoline was 0.13, the price hike means that the quantity demanded decreased by

A)1.43 percent.
B)8.46 percent.
C)0.16 percent.
D) 4.31 percent.
E)6.46 percent.

Question 73

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

A)independent of the units of measurement.
B)dependent on the units of measurement.
C)easier to calculate.
D)harder to calculate.
E)always negative whereas the slope is always positive.

Question 74

Using the data in the table above, the demand for skirts is

A)elastic.
B)unit elastic.
C)inelastic.
D)indeterminate.
E)perfectly inelastic.

Question 75

The data in the table above give two points on the demand curve for pizza.Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in price?

A)8.2 percent
B)15.5 percent
C)10.5 percent
D)5.0 percent
E)1.0 percent

Question 76

Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the price elasticity of demand? (Use the midpoint method.)

A)0.33
B)0.25
C)1.00
D)1.33
E)3.00

Question 77

When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month.Using the midpoint method, the price elasticity of demand is

A)0.77.
B)1.30.
C)0.07.
D)3.00.
E)2.50.

Question 78

Suppose the University of Oklahoma increases the price of student football tickets for the 2012 season by 30 percent.If the price elasticity of demand for student tickets is 1.22, the price increase leads to

A)a 36.6 percent decrease in the quantity demanded.
B)a 30 percent decrease in the quantity demanded.
C)a 1.22 percent decrease in the quantity demanded.
D)28.78 percent decrease in the quantity demanded.
E)no change in the quantity demanded.

Question 79

In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $8 to $7 is equal to

A)2.50.
B)1.63.
C)0.40.
D)0.62.
E)1.00.

Question 80

When hamburger is $3 per pound, Ms.Rush buys 6 pounds.When hamburger is $2 per pound, Ms.Rush buys 10 pounds.Describe Ms.Rush's demand between these two prices.

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