Deck 4: Elasticity

Question 1

The Dean of Arts recently announced a 20% increase in tuition and explained that the increase was needed to raise the university's revenue.Which of the following might the Dean be assuming about the elasticity of demand for education at her school?

A)It is elastic.
B)It is inelastic.
C)It is perfectly elastic.
D)It could be either elastic or perfectly elastic.

Answer 1

It is inelastic.

Question 2

What is total revenue?

A)It is the profits from doing business.
B)It is the total value of sales less cost.
C)It is elasticity multiplied by quantity sold.
D)It is price multiplied by quantity sold.

Answer 2

It is price multiplied by quantity sold.

Question 3

What is the effect on total revenue if demand is inelastic and price rises?

A)Total revenue will fall.
B)Total revenue will rise.
C)Total revenue may rise or fall depending on the size of the price increase.
D)Elasticity is not relevant,since total revenue always rises if price increases.

Answer 3

Total revenue will rise.

Question 4

What is the term for the responsiveness of quantity demanded to a change in price?

A)Elastic demand.
B)The elasticity coefficient.
C)Unitary elasticity.
D)Price elasticity of demand.

Question 5

What is price elasticity of demand?

A)The responsiveness of price to a change in the quantity demanded.
B)The responsiveness of quantity demanded to a change in price.
C)Price divided by quantity demanded.
D)Price multiplied by quantity demanded.

Question 6

What has happened to price if the price elasticity of demand is 2 and quantity demanded increases by 10%?

A)It increases by 10%.
B)It decreases by 5%.
C)It decreases by 20%.
D)It increases by 20%.

Question 7

What term is used to describe quantities demanded that do not change much in response to a change in price?

A)Inelastic demand.
B)Elastic demand.
C)Unitary elasticity.
D)Price elasticity of demand.
E)The elasticity coefficient.

Question 8

What is unitary elasticity?

A)An elasticity coefficient which is negative.
B)An elasticity coefficient which is equal to zero.
C)An elasticity coefficient which is equal to one.
D)A percentage change in quantity which is exactly equal to the percentage change in demand.
E)Where elasticity and inelasticity are balanced.

Question 9

What is the formula used to calculate the price elasticity of demand?

A)Change in price divided by change in quantity demanded.
B)Change in quantity demanded divided by change in price.
C)Percentage change in price divided by percentage change in quantity demanded.
D)Percentage change in quantity demanded divided by percentage change in price

Question 10

What measures the responsiveness of quantity demanded to a change in price?

A)Total revenue.
B)Equilibrium price.
C)Price elasticity of demand.
D)Income elasticity.
E)Inelasticity.

Question 11

What is the term for the total amount of income a firm receives from its sales?

A)Total profit.
B)Total revenue.
C)Revenue coefficient.
D)Total demand.
E)Sales maximizing.

Question 12

What does the elasticity coefficient refer to?

A)It is price multiplied by the quantity of the product sold.
B)It indicates the responsiveness of quantity demanded to a change in price.
C)It is the responsiveness of price to a change in quantity demanded.
D)It is quantity demanded at any given price.

Question 13

Suppose that the price of a product decreased from $6.50 to $5.50,and the quantity demanded increased from 55 to 65.What is the value of the price elasticity of demand?

A)0.5.
B)0.85.
C)1.0.
D)1.18.
E)2.0.

Question 14

Suppose that the price of a product increased from $1.90 to $2.10,and the quantity demanded decreased from 24 to 16.What is the value of the price elasticity of demand?

A)0.5.
B)0.58.
C)1.0.
D)1.73.
E)4.0.

Question 15

All of the following statements except one are correct concerning a product which has an elastic demand.Which is the exception?

A)Any relative change in price is greater than the relative change in quantity.
B)Buyers are relatively sensitive to price changes.
C)The elasticity coefficient is greater than one.
D)Total revenue rises if price decreases.

Question 16

What does the term elastic demand mean?

A)Quantities demanded which are not very responsive to a change in price.
B)The responsiveness of quantity demanded to a change in price.
C)An elasticity coefficient which is equal to one.
D)Quantities demanded which are quite responsive to a change in price.
E)The responsiveness of price to a change in quantity demanded.

Question 17

What will happen to the quantity demanded if the price elasticity of demand is 2 and price increases by 10%?

A)It increases by 10%.
B)It decreases by 5%.
C)It decreases by 20%.
D)It increases by 20%.

Question 18

When is the percentage change in quantity exactly equal to the percentage change in price?

A)When there is unitary elasticity.
B)When demand is inelastic.
C)When demand is elastic.
D)When demand does not change.

Question 19

Under which of the following situations will total revenue fall?

A)If elasticity is > 1 and price falls.
B)If elasticity is > 1 and price rises.
C)If elasticity is < 1 and price rises.
D)If elasticity is = 1 and price falls.

Question 20

Suppose that the price of a product increased from $18 to $22,and the quantity demanded decreased from 63 to 57.What is the value of the price elasticity of demand?

A)0.43.
B)0.5.
C)1.5.
D)2.0.
E)2.3.

Question 21

Refer to the information above to answer this question.What is the elasticity of demand in the $16 to $20 range?

A)0.02.
B)0.7.
C)1.4.
D)1.
E)2.1.

Question 22

If the price of Digestive Fire herbal tablets increases from $35 to $45 a bottle and,as a result,the seller's total revenue increases from $77,000 to $94,500 per month,what is the elasticity of demand?

A)0.08.
B)0.19.
C)0.82.
D)1.26.
E)2.14.

Question 23

Suppose that the value of the price elasticity of demand for a product is 2 and its price increases by 16%.What will happen to the quantity demanded?

A)It will increase by 8%.
B)It will increase by 32%.
C)It will decrease by 8%.
D)It will decrease by 32%.
E)It cannot be determined without further information.

Question 24

Refer to the information above to answer this question.Over what price range is demand elastic?

A)$14 to $16.
B)$14 to $20.
C)$16 to $18.
D)$16 to $20.
E)$18 to $22.

Question 25

Refer to the information above to answer this question.Over what price range is demand inelastic?

A)$14 to $16.
B)$14 to $18.
C)$16 to $18.
D)$18 to $20.
E)$18 to $22.

Question 26

Refer to the information above to answer this question.At what price is total revenue maximized?

A)$14.
B)$16.
C)$18.
D)$20.
E)$22.

Question 27

What do products such as household electricity,tobacco and toothpicks have in common?

A)They are all inferior goods.
B)They all are likely to have incomes elasticities greater than one.
C)The demand for all three goods is elastic.
D)The demand for all three goods is inelastic.
E)They all have a large number of substitute goods.

Question 28

A manufacturer of ginseng tea found that when it lowered the price of a can of its product from $8 to $7,total revenue declined and when it raised the price from $8 to $9 and total sales revenue again declined.Given this information,which of the following statements is correct?

A)The demand for the product is elastic in the $7 to $8 price range.
B)The demand for the product is inelastic in the $8 to $9 price range.
C)$8 cannot be an equilibrium price for this product.
D)The demand for the product is inelastic in the $7 to $8 range.

Question 29

Which of the following is the most likely explanation for the fact that the price elasticity of demand for celery is high?

A)The average household spends a large percentage of its income on celery.
B)There are a large number of substitute products available.
C)The time needed to produce this product is short.
D)The typical price of this product is low.

Question 30

Refer to the information above to answer this question.Which of the following statements is correct?

A)Demand is inelastic if the price changes from $5 to $7.
B)Demand is inelastic if the price changes from $4 to $7.
C)Demand is inelastic if the price changes from $6 to $10.
D)Demand is unitary elastic if the price changes from $1 to $10.
E)None of the choices are correct.

Question 31

Refer to the information above to answer this question.What is the elasticity of demand in the $14 to $16 range?

A)0.02.
B)0.7.
C)1.4.
D)2.1.

Question 32

If the price of Moonlight massage oil decreases from $3 to $2.50 and,as a result,total revenue of $6,000 does not change,what is the elasticity of demand?

A)0.22.
B)0.55.
C)1.
D)1.2.
E)1.67.

Question 33

Refer to the information above to answer this question.Which of the following statements is correct?

A)Demand is inelastic between the prices of $1 and $5.
B)Demand is inelastic between the prices of $4 and $7.
C)Demand is inelastic between the prices of $6 and $10.
D)No comment on elasticity can be made from the above information.

Question 34

If a product has few substitutes,which of the following statements is correct?

A)It is likely that its income elasticity is high.
B)It is likely that it is an inferior product.
C)It is likely that its supply elasticity is high.
D)It is likely that its price elasticity of demand is low.

Question 35

If the price of Moonlight massage oil decreases from $3 to $2.50 and,as a result,total revenue increases from $6,000 to $7,500,what is the elasticity of demand?

A)0.22.
B)0.55.
C)1.22.
D)1.67.
E)2.2.

Question 36

Refer to the information above to answer this question.What are the elasticity coefficients for the price ranges $1 to $2 and $9 to $10,respectively?

A)0.22 and 2
B)2 and 0.22
C)0.16 and 6.33
D)6.33 and 0.15

Question 37

Refer to the information above to answer this question.At what price is the seller's total revenue maximized?

A)$1.
B)$10.
C)$5 or $6.
D)$4 or $7.
E)$5.

Question 38

What do products such as movies,tomatoes and restaurant meals have in common?

A)They are all inferior goods.
B)They all are likely to have incomes elasticities less than one.
C)The demand for all three goods is price elastic.
D)The demand for all three goods is price inelastic.
E)They all have a small number of substitute goods.

Question 39

Refer to the information above to answer this question.What is the elasticity of demand in the $20 to $22 range?

A)0.02.
B)0.7.
C)1.4.
D)2.1.
E)3.33.

Question 40

Suppose that the value of the price elasticity of demand for a product is 0.5 and its price decreases by 10%.What will happen to the quantity demanded?

A)It will increase by 5%.
B)It will increase by 20%.
C)It will decrease by 5%.
D)It will decrease by 20%.
E)It cannot be determined without further information.

Question 41

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand when the elasticity coefficient is less than 1 but greater than 0?

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

Question 42

The graph below illustrates three demand curves.

Refer to the graph above to answer this question.Which of the following statements is correct?

A)The price elasticity of demand between points A and B on D₂ is 0.5.
B)D1 illustrates an inferior good.
C)The slope of all three demand curves is constant.
D)The shift from D₁ to D₂ could illustrate a change in the quantity demanded for a product as a result of a decrease in the price of a substitute good.

Question 43

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

A)It is higher in the short run than in the long run because people's habits change slowly.
B)It is higher in the long run than the short run because people have more time to find substitute products.
C)It is the same in the short run and the long run.
D)It is higher in the short run because markets adjust slowly to changes.

Question 44

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is demand when a firm can sell a constant amount at either a higher or a lower price?

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

Question 45

The graph below illustrates three demand curves.

Refer to the graph above to answer this question.Which of the following statements is correct?

A)The price elasticity of demand between points A and C on D₃ is 0.267.
B)The price elasticity of demand between points A and C on D₃ is 0.375.
C)The demand between points A and C on D₃ is elastic.
D)The slope of demand curve D₁ and its price elasticity are the same.

Question 46

The world's price of oil increased dramatically in 1973.Which of the following statements was most valid in 2012?

A)The price elasticity of demand for oil for the 40 year period would be lower than for a shorter period.
B)The price elasticity of demand for oil for the 40 year period would be higher than for a shorter period.
C)The income elasticity for oil was much lower in 2012 than in 1973 because of the price increase.
D)The supply elasticity of oil was much lower in 2012 than in 1973 because of the price increase.

Question 47

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand when the elasticity coefficient is greater than 1?

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

Question 48

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand when an increase in price raises total revenue?

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

Question 49

What is true about the price elasticity of demand for products such as sugar,salt and household electricity?

A)It is perfectly elastic.
B)It is perfectly inelastic.
C)It is relatively elastic.
D)It is relatively inelastic.

Question 50

Which of the following statements is most likely true about the price elasticity of demand for beer?

A)It is perfectly elastic.
B)It is perfectly inelastic.
C)It is more elastic than the demand for Labatt's Blue.
D)It is less elastic than the demand for Molson's Canadian.

Question 51

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand curve that is parallel to the horizontal axis?

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

Question 52

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand curve that forms a rectangular hyperbola?

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

Question 53

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand when a decrease in price increases total revenue?

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

Question 54

If the short-run price elasticity of demand for petroleum is 0.8,which of the following statements is most likely to be true for the long run?

A)The price elasticity of demand will be less than 0.8.
B)The price elasticity of demand will be greater than 0.8.
C)The price elasticity of demand will be 0.8.
D)No generalization can be made about the differences between the short run and the long run.

Question 55

The graph below illustrates three demand curves.

Refer to the graph above to answer this question.Which of the following statements is correct?

A)Demand curve D₃ is the most inelastic demand.
B)Equilibrium price must be $50.
C)If price is $30 and demand is D₃ then the quantity demanded is 720 units per day.
D)Demand curve D₁ is more inelastic than D₃.
E)Demand curve D₁ is perfectly elastic.

Question 56

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand curve that is parallel to the vertical axis?

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

Question 57

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand when a firm can sell either more or less of a product at a constant price?

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

Question 58

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
Refer to the information above to answer this question.What is a demand when a change in quantity leaves total revenue unchanged?

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

Question 59

Which of the following products has the most inelastic demand?

A)Restaurant meals.
B)Tomatoes.
C)Movie theatre admissions.
D)Eggs.
E)Ocean cruises.

Question 60

The graph below illustrates three demand curves.

Refer to the graph above to answer this question.Between the price range of $50 and $60,which of the three demand curves is the most elastic?

A)D₁.
B)D₂.
C)D₃.
D)Cannot be determined.

Question 61

What is the effect on tax revenue if the government increases the excise tax on a product that has an elastic demand?

A)It will rise.
B)It will fall.
C)It may rise or fall depending on whether the tax is a flat rate or a percentage of the price of the product.
D)It is totally unpredictable.

Question 62

If the government puts a $2 excise tax on a product and as a result,price rises by $0.75,which of the following statements is correct?

A)The sellers pay more of the tax than the buyers.
B)The buyers pay more of the tax than the sellers.
C)The government's tax revenue falls.
D)The quantity demanded of the product falls by 37.5%.
E)The quantity demanded of the product rises by 37.5%.

Question 63

Why do some people argue that attempts to reduce much of the crime in our society by governments "getting tough" on crime will not be successful?

A)Because much of the crime in our society is drug related and the supply of illegal drugs is very inelastic.
B)Because much of the crime in our society is drug related and the supply of illegal drugs is very elastic.
C)Because much of the crime in our society is drug related and the demand for illegal drugs is very elastic.
D)Because much of the crime in our society is drug related and the demand for illegal drugs is very inelastic.

Question 64

How will the imposition of a sales tax shift the supply curve?

A)The supply curve will shift to the left.
B)The supply curve will shift to the right.
C)The supply curve might shift to the right or to the left depending on whether the tax was a flat rate tax or a percentage tax.
D)Imposing a sales tax will have no effect on the supply curve.

Question 65

Refer to the graph above to answer this question.Which of the following statements is correct?

A)The demand curves in graphs I,II and III are,respectively,perfectly elastic,inelastic and perfectly inelastic.
B)The demand curves in graphs I,II and III are,respectively,perfectly inelastic,inelastic and perfectly elastic.
C)The demand curves in graphs I,II and III are,respectively,perfectly inelastic,unitary elastic and perfectly elastic.
D)All three demand curves have an elastic and an inelastic portion to them.

Question 66

The graph below illustrates three demand curves.

Refer to the graph above to answer this question.In the $50 to $60 price range,which of the following statements is correct?

A)D₁ and D₂ are both elastic.
B)D₁ and D₂ are both perfectly inelastic.
C)D₂ is the most inelastic.
D)D₃ is the most inelastic.
E)D₁ is the most inelastic.

Question 67

Refer to the graph above to answer this question.Which of the following statements is correct?

A)The demand curve in I is perfectly elastic.
B)The demand curve is II is unitary elastic.
C)The demand curve in III is perfectly inelastic.
D)The demand curve in I is unitary elastic.

Question 68

On what type of products do governments impose "sin" taxes?

A)On products with elastic demand such as candy.
B)On products with inelastic demand such as alcohol.
C)On illegal products.
D)On consumer goods but not capital goods.

Question 69

Below is a graphical representation of the wheat market in the distant land of Nod.

Refer to the graph above to answer this question.If supply was increased by 30 million bushels,what would be the new equilibrium price and quantity?

A)$3 and 20 million bushels.
B)$3 and 50 million bushels.
C)$3 and 70 million bushels.
D)$7 and 30 million bushels.
E)$7 and 60 million bushels.

Question 70

Refer to the information above to answer this question.All of the following statements except one are correct.Which is the exception?

A)The equilibrium price and quantity are $9 and 60.
B)At a price of $7,there is a surplus of 40.
C)At a price of $10,there is a surplus of 20.
D)At a price of $8,there is a shortage of 20.

Question 71

If the government increases the excise tax on cigarettes by 10%,which of the following statements is correct?

A)The government's tax revenue will fall since the demand for cigarettes is inelastic.
B)The quantity demanded of cigarettes will fall by more than 10% because the demand is inelastic.
C)Both the quantity demanded and supplied of cigarettes will fall by more than 10% because the demand is inelastic.
D)Since the demand for cigarettes is highly inelastic,the subsequent increase in price will be greater than the decrease in quantity demanded.

Question 72

Refer to the graph above to answer this question.Which of the following statements is correct?

A)Demand curve D₁ is the inelastic portion of a curve that could be extended downward to the right.
B)Demand curve D₁ is the elastic portion of a curve that could be extended downward to the right.
C)Demand curve D₁ is more inelastic than D₂.
D)Demand curve D₁ is perfectly elastic.

Question 73

Graphically,what is the effect of imposing an excise tax on a product?

A)It will shift both the supply and the demand curve for the product to the left.
B)It will shift the supply curve for the product to the left.
C)It will shift the supply curve for the product to the right.
D)It will shift both the supply and the demand curve for the product to the right.
E)It will shift the supply curve for the product to the left and the demand curve to the right.

Question 74

Refer to the information above to answer this question.What will be the equilibrium price and quantity if a $2 per unit excise tax is imposed on this product?

A)$11 and 40.
B)$11 and 80.
C)$10 and 50.
D)$10 and 70.
E)$7 and 40.

Question 75

Below is a graphical representation of the wheat market in the distant land of Nod.

Refer to the graph above to answer this question.What is the price elasticity of demand between the original equilibrium and the new equilibrium after the increase in supply of 30 million bushels?

A)0.44.
B)0.5.
C)2.
D)2.25.

Question 76

What is the most likely effect of a government reducing the supply of illegal drugs?

A)The total amount spent on illegal drugs will decrease.
B)The total amount spent on illegal drugs will increase.
C)The quantity of illegal drugs consumed will remain unchanged.
D)The demand for illegal drugs will fall.
E)The demand for illegal drugs will increase.

Question 77

Below is a graphical representation of the wheat market in the distant land of Nod.

Refer to the graph above to answer this question.At equilibrium,what is the total expenditure by consumers on wheat?

A)$5.
B)$40 million.
C)$200 million.
D)Cannot be determined.

Question 78

Refer to the graph above to answer this question.Which of the following statements is correct?

A)Demand curve D₂ is the inelastic portion of a curve that could be extended upward to the left.
B)Demand curve D₁ is the elastic portion of a curve that could be extended upward to the left.
C)Demand curve D₂ is more elastic than D₁.
D)Demand curve D₂ is perfectly inelastic.

Question 79

Refer to the information above to answer this question.If the government imposes a $2 per unit sales tax on this product,how much of that tax will consumers pay and how much will sellers pay?

A)Consumers will pay all $2 of the tax.
B)Consumers will pay $1.50 and sellers $.50.
C)Consumers and sellers will each pay $1.
D)Consumers will pay $.50 and seller $1.50.
E)Sellers will pay all $2 of the tax.

Question 80

If a sales tax is imposed on a product,which of the following statements is correct?

A)If the demand for the product is inelastic,the seller will pay a larger percentage of the tax than will the consumer.
B)If the demand for the product is elastic,the seller will pay a smaller percentage of the product than will the consumer.
C)The consumer will pay 100% of the tax.
D)If the demand for the product is inelastic,the consumer will pay a larger percentage of the tax than will the seller.