Deck 4: Elasticity

Question 1

If consumers' buying decisions are not very sensitive to changes in price, then their demand is:

A) more elastic.
B) less elastic.
C) perfectly inelastic.
D) unit elastic.

Answer 1

less elastic.

Question 2

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the result is a:

A) very elastic demand.
B) less elastic demand.
C) low magnitude of response.
D) high magnitude of response.

Answer 2

less elastic demand.

Question 3

Economists use the percentage change in quantity rather than the absolute change in quantity because:

A) percentage changes are easier to calculate than absolute changes.
B) the measured elasticity is the same regardless of the unit of measurement for quantity.
C) absolute changes are confusing to convert.
D) absolute changes often result in negative numbers.

Answer 3

the measured elasticity is the same regardless of the unit of measurement for quantity.

Question 4

Suppose a decrease in price increases quantity demanded from 8 to 12. Using the mid-point formula, the percentage change in quantity demanded is:

A) 0.1, and is elastic.
B) 40 = 400 percent.
C) 0.40 = 40 percent.
D) 0.40 = 40 percent

Question 5

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:

A) an inelastic demand.
B) a low magnitude of response.
C) an elastic demand.
D) a high magnitude of response.

Question 6

The mid-point method of calculating price elasticity of demand:

A) measures the percentage changes relative to a point midway between two points on a demand curve.
B) measures the absolute change relative to a point midway between two points on a demand curve.
C) measures the percentage change relative to a point midway between demand and supply.
D) None of these is true.

Question 7

The price elasticity of demand for eggs is 0.27. Thus, 0.27 is the:

A) percentage change in the quantity demanded of eggs when the price of eggs increases by one percent.
B) size of the shift in the demand for eggs when the price of eggs changes by one percent.
C) size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price change.
D) percentage change in the price of eggs when the quantity demanded of eggs increases by one percent.

Question 8

Elasticities are used to measure responses to a change in:

A) the price of a good.
B) the price of a related good.
C) income.
D) All of these are true.

Question 9

The mid-point method of calculating elasticity is typically used because:

A) it is easier to calculate.
B) it is universally understood by all economists.
C) the negative sign can then be ignored.
D) it is a consistent way to estimate the elasticity of demand between two points on a demand curve, regardless of the direction of the movement.

Question 10

Suppose an increase in price decreases quantity demanded from 210 to 190. Using the mid-point formula, the percentage change in quantity demanded is:

A) 2 = 200 percent.
B) 0.2 = 20 percent.
C) 0.2 = 20 percent
D) 0.1 = 10 percent

Question 11

If supply and demand analysis is a measure of how, then elasticity is a measure of:

A) how much.
B) when.
C) why.
D) how quickly.

Question 12

The calculated price elasticity of demand:

A) is always a negative number, although it is sometimes reported as an absolute value.
B) is sometimes negative and sometimes positive, depending on the magnitude of response.
C) is always a positive number, because price and quantity are directly related in terms of demand.
D) can be positive or negative, but is always reported as an absolute value.

Question 13

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil, then 0.02 is the

A) price elasticity of demand.
B) price elasticity of supply.
C) cross-price elasticity of demand.
D) income elasticity of demand.

Question 14

If a good has an elastic demand, then:

A) a small percentage change in price will cause a larger percentage change in quantity demanded.
B) a small percentage change in price will cause virtually no change in quantity demanded.
C) a large percentage change in price will cause a smaller change in quantity demanded.
D) any percentage change in price will cause an almost immediate response in quantity demanded.

Question 15

Suppose price increases from $7.00 to $13.00. Using the mid-point formula, the percentage change in price is:

A) .0.6 = 60 percent.
B) 0.6 = 60 percent.
C) 70 percent.
D) 130 percent.

Question 16

Different measurements of elasticity include:

A) income elasticity of demand, income elasticity of supply.
B) price elasticity of demand, price elasticity of supply.
C) cross-price elasticity of demand, income elasticity of supply.
D) preference elasticity of demand, cross-price elasticity of supply.

Question 17

Mathematically, price elasticity of demand is the percentage change in the:

A) quantity demanded of a good in response to a given percentage change in the price of the good.
B) price of a good that is demanded in response to a given percentage change in quantity.
C) quantity of a good that is supplied in response to a given percentage change in price.
D) price of a good that is supplied in response to a given percentage change in quantity.

Question 18

Price elasticity is a measure of how

A) much a market responds to a change in market conditions.
B) much consumers or producers respond to a change in market price.
C) quickly consumers or producers respond to a change in market price.
D) quickly a market will respond to a change in market conditions.

Question 19

The concept of price elasticity is applied to changes in:

A) quantity demanded, but not quantity supplied.
B) quantity supplied, but not quantity demanded.
C) both quantities supplied and quantity demanded.
D) neither quantity supplied nor quantity demanded.

Question 20

The most commonly used measures of elasticity are:

A) income elasticity of demand and price elasticity of supply.
B) price elasticity of demand and price elasticity of supply.
C) cross-price elasticity of demand and cross-price elasticity of supply.
D) price elasticity of demand and cross-price elasticity of supply.

Question 21

The determinants of price elasticity of demand include:

A) availability of substitutes, cost relative to benefit, and scope of market.
B) degree of necessity, cost relative to income, scope of market, and adjustment time.
C) availability of complements, cost relative to income, and scope of market.
D) cost relative to income, scope of demand, and adjustment time.

Question 22

Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, the percentage change in price is:

A) 0.35 = 35 percent.
B) 0.7 = 70 percent.
C) 0.7 = 70 percent
D) 14 percent.

Question 23

Suppose when the price of mascara is $12, the quantity demanded is 450, and when the price is $8, the quantity demanded is 550. Using the mid-point method, the price elasticity of demand is:

A) -0.5
B) -2.0
C) -55
D) -180

Question 24

Suppose price increases from $9.00 to $11.00. Using the mid-point formula, the percentage change in price is:

A) 20%
B) 25%
C) 20%.
D) 2%

Question 25

Producers want to calculate the price elasticity of demand because they want to:

A) know the goods and services for which consumers are most sensitive to price changes.
B) be able to predict the future preferences of their customers.
C) know that consumers will have the same response to a price change regardless of the good or service.
D) understand what goods their customers dislike the most.

Question 26

If the price of hairbrushes decreases by 20 percent, the quantity demanded increases by 2 percent. The price elasticity of demand is:

A) 0.1, and is elastic.
B) 10 and is elastic.
C) 0.1 and is inelastic.
D) 10 and is inelastic.

Question 27

Suppose when the price of a cookie is $2.50, the quantity demanded is 50, and when the price is $1, the quantity demanded is 200. Using the midpoint method, the price elasticity of demand is:

A) -1.40
B) -0.72
C) -140
D) -7.2

Question 28

Suppose when the price of movie tickets is $7.50, the quantity demanded is 550, and when the price is $8.50, the quantity demanded is 450. Using the mid-point method, the price elasticity of demand is:

A) 0.625
B) 0.625.
C) 1.6
D) 1.6.

Question 29

If the price of a DVD decreases by 50 percent, the quantity demanded increases by 75 percent. The price elasticity of demand is:

A) -1.5 and is inelastic.
B) -1.5 and is elastic.
C) -0.67 and is elastic.
D) -0.67 and is inelastic.

Question 30

The demand for spring break vacations is _________________ than is the demand for textbooks because ________________.

A) less price elastic; vacations have more available substitutes.
B) more price elastic; vacations have less available substitutes.
C) less price elastic; vacations are more of a luxury.
D) more price elastic; vacations are more of a luxury.

Question 31

If the price of a cup of coffee increases by 50 percent, the quantity demanded decreases by 50 percent. The price elasticity of demand is:

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

Question 32

If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is:

A) 1.0
B) 0.2
C) 5.0
D) 2.0

Question 33

Suppose when the price of a can of tuna is $1.30, the quantity demanded is 9, and when the price is $1.50, the quantity demanded is 7. Using the mid-point method, the price elasticity of demand is:

A) -1.75
B) -0.57
C) 0.57
D) 29 percent

Question 34

The demand for a cup of coffee is ______________ than is the demand for a dinner at a fancy restaurant because _________________.

A) more price elastic; a cup of coffee requires a smaller portion of one's income.
B) less price elastic; a cup of coffee requires a smaller portion of one's income.
C) less price elastic; a cup of coffee is more of a luxury.
D) more price elastic; a cup of coffee is more of a luxury.

Question 35

Suppose quantity supplied increases from 16 to 24. Using the mid-point formula, the percentage change in quantity supplied is:

A) 40%
B) 0.4%
C) 4%
D) 40%.

Question 36

The demand for novels is _____________ than is the demand for science textbooks because __________________.

A) less price elastic; novels have more available substitutes.
B) more price elastic; novels have less available substitutes.
C) less price elastic; novels have less available substitutes.
D) more price elastic; novels have more available substitutes.

Question 37

The demand for Farm fresh brand apple juice is likely to be:

A) very price elastic, because there are many close substitutes available.
B) less price elastic, because there are many close substitutes available.
C) very price elastic, because the adjustment time is so fast.
D) less price elastic, because the adjustment time is so slow.

Question 38

When a good has many close substitutes available, it is likely to be:

A) less price elastic than are goods without close substitutes available.
B) more price elastic than are goods with many complement goods available.
C) less price elastic than are goods with many complement goods available.
D) more price elastic than are goods without close substitutes available.

Question 39

The demand for a specific brand of corn flakes cereal is likely to be:

A) very price elastic, because there are many close substitutes available.
B) less price elastic, because there are many close substitutes available.
C) very price elastic, because that specific brand is a unique product.
D) less price elastic, because the specific brand is a unique product.

Question 40

Suppose when the price of calculators is $18, the quantity demanded is 90, and when the price is $22, the quantity demanded drops to 70. Using the mid-point method, the price elasticity of demand is:

A) 1.25
B) 25 percent
C) 20 percent
D) 25

Question 41

The demand for shoes is ___________________ than is the demand for sneakers because __________________.

A) less price elastic; the scope of the market for shoes is less broadly defined
B) more price elastic; the scope of the market for shoes is less broadly defined
C) less price elastic; the scope of the market for shoes is more broadly defined
D) more price elastic; the scope of the market for shoes is more broadly defined

Question 42

The demand for dolls is __________________ than is the demand for Barbie dolls because ___________________.

A) less price elastic; the scope of the market for dolls is more broadly defined
B) more price elastic; the scope of the market for dolls is more broadly defined
C) less price elastic; Barbie dolls have more available substitutes
D) more price elastic; Barbie dolls have more available substitutes

Question 43

The demand for classical music is _______________ than is the demand for Beethoven's music because _______________.

A) less price elastic; classical music requires a smaller portion of one's income
B) more price elastic; classical music requires a smaller portion of one's income
C) less price elastic; the scope of the market for classical music is more broadly defined
D) more price elastic; the scope of the market for classical music is more broadly defined

Question 44

The price elasticity of demand for business air travel is .80 and the price elasticity of demand for leisure air travel is 1.60. Therefore, the demand for leisure air travel

A) is less elastic than the demand for business travel.
B) is inelastic.
C) is more elastic than the demand for business travel.
D) is unrelated to consumers' incomes.

Question 45

The demand for ice cream is _________________ than is the demand for frozen treats because ________________.

A) less price elastic; ice cream requires a smaller portion of one's income
B) more price elastic; ice cream requires a smaller portion of one's income
C) less price elastic; the scope of the market for ice cream is less broadly defined
D) more price elastic; the scope of the market for ice cream is less broadly defined

Question 46

The response in quantity demanded to a price increase in subway rides:

A) will be more elastic in six weeks than in six months.
B) will be less elastic in six weeks than in six months.
C) will be the same over that time period.
D) is unpredictable without more information.

Question 47

A perfectly elastic demand is one in which the:

A) demand curve is perfectly vertical.
B) demand curve is perfectly horizontal.
C) price elasticity is exactly 1.
D) response to a change in price is immediate.

Question 48

The demand for Ben & Jerry's ice cream is _________________ than is the demand for all ice cream because _______________.

A) less price elastic; the scope of the market for Ben & Jerry's is less broadly defined
B) more price elastic; the scope of the market for Ben & Jerry's is less broadly defined
C) less price elastic; Ben & Jerry's has fewer available substitutes
D) more price elastic; Ben & Jerry's has fewer available substitutes

Question 49

A horizontal demand curve indicates:

A) a perfectly inelastic demand.
B) quantity demanded will drop to zero if the price increases by any amount.
C) price elasticity is 1.
D) price is not important in this market.

Question 50

The demand for steak is _______________________ than is the demand for food because _____________________.

A) less price elastic; the scope of the market for steak is more broadly defined
B) more price elastic; the scope of the market for steak is more broadly defined
C) less price elastic; the scope of the market for steak is less broadly defined
D) more price elastic; the scope of the market for steak is less broadly defined

Question 51

The demand for a subway ride is probably ___________________ than is the demand for a car because ___________________.

A) less price elastic; a subway ride requires a smaller portion of one's income
B) more price elastic; a subway ride requires a smaller portion of one's income
C) less price elastic; people will take a longer time to adjust to the change in the price of a subway ride
D) more price elastic; people will take a longer time to adjust to the change in the price of a subway ride.

Question 52

The price elasticity of demand for eggs is .27 and the price elasticity of demand for soft drinks is .70. Therefore, the demand for eggs

A) is more elastic.
B) is less elastic.
C) cannot be compared to the demand for soft drinks because both are negative.
D) cannot be compared to the demand for soft drinks because eggs cannot be substituted for soft drinks.

Question 53

The demand for markers is _______________________ than is the demand for Sharpies because ____________________.

A) less price elastic; markers require a smaller portion of one's income
B) more price elastic; markers require a smaller portion of one's income
C) less price elastic; the scope of the market for markers is more broadly defined
D) more price elastic; the scope of the market is for markers is more broadly defined

Question 54

The price elasticity of demand for leisure air travel is 1.60. Therefore, a

A) 10 percent decrease in the price of leisure air travel will cause a 16 percent decrease in the amount of leisure air travel.
B) 10 percent decrease in the price of leisure air travel will cause a 16 percent increase in the amount of leisure air travel.
C) 16 percent decrease in the price of leisure air travel will cause a 10 percent increase in the amount of leisure air travel.
D) a 16 percent decrease in the price of leisure air travel will cause a 10 percent decrease in the amount of leisure air travel.

Question 55

A perfectly elastic demand:

A) means consumers are extremely sensitive to a change in price.
B) means quantity demanded is unchanged if the price changes by any amount.
C) is demonstrated by a vertical demand curve.
D) has a price elasticity of 1.

Question 56

The demand for a movie ticket is probably _________________ than is the demand for a Broadway show ticket because ______________.

A) less price elastic; a movie ticket requires a smaller portion of one's income.
B) more price elastic; a movie ticket requires a smaller portion of one's income.
C) less price elastic; a movie ticket has fewer available substitutes.
D) more price elastic; a movie ticket has fewer available substitutes.

Question 57

The more time people have to adjust to a price change:

A) the less elastic their demand will be.
B) will not affect the elasticity of their response unless it is a luxury good.
C) the more elastic their demand will be.
D) will not affect the elasticity of their response unless the good is a necessity.

Question 58

The change in the quantity demanded of gas because of increasing gas prices over the last decade:

A) was more elastic than it has been in the last six months.
B) was less elastic than it has been in the last six months.
C) has been relatively the same over both time periods.
D) has become a non-issue for people now that they are used to higher gas prices.

Question 59

If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is probably _________________ than is the demand for a pound sugar of because ________________.

A) less price elastic; coffee requires a larger portion of consumers' incomes.
B) more price elastic; coffee requires a larger portion of consumers' incomes.
C) less price elastic; people will take a longer time to adjust to the change in its price.
D) more price elastic; people will take a longer time to adjust to the change in its price

Question 60

The demand for a pack of gum is ______________ than is the demand for a steak because _______________.

A) less price elastic; a pack of gum requires a smaller portion of one's income.
B) more price elastic; a pack of gum requires a smaller portion of one's income.
C) less price elastic; a pack of gum is more of a luxury.
D) more price elastic; a pack of gum is more of a luxury.

Question 61

The price elasticity ofdemand for insulin is:

A) likely to be perfectly inelastic over some range of prices.
B) perfectly elastic.
C) a large portion of someone's income.
D) low relative to the supply.

Question 62

A perfectly inelastic demand means:

A) consumers will change the quantity they purchase when price changes.
B) demand will drop to zero if the price increases by any amount.
C) consumers will not change the quantity they purchase when price changes.
D) the demand curve is perfectly horizontal.

Question 63

A perfectly inelastic demand is one in which the:

A) demand curve is perfectly vertical.
B) demand curve is perfectly horizontal.
C) measured elasticity is exactly 1.
D) response to a change in price is immediate.

Question 64

An increase in price:

A) cannot cause a quantity effect.
B) cannot cause a price effect.
C) causes a decrease in revenue resulting from selling fewer units and a simultaneous increase in revenue resulting from receiving a higher price.
D) causes an increase in quantity demanded.

Question 65

Assuming price elasticity of demand is reported as an absolute value, an inelastic demand has a measured elasticity:

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

Question 66

Total revenue is the amount:

A) a firm receives from the sale of goods and services.
B) a firm keeps after all expenses are paid.
C) of sales that get reinvested in the firm.
D) a firm receives from dividends.

Question 67

A perfectly inelastic demand:

A) means people will quickly change the quantity they purchase when price changes.
B) means people will not respond to any change in price.
C) is demonstrated by a perfectly horizontal demand curve.
D) has an absolute value greater than 1.

Question 68

Assuming price elasticity of demand is reported as an absolute value, a good with unit elastic demand has an elasticity:

A) between zero and one.
B) greater than one.
C) less than one, but greater than zero.
D) equal to one.

Question 69

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 1.2 indicates an:

A) elastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
B) inelastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
C) elastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.
D) inelastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.

Question 70

Assuming price elasticity of demand is reported as an absolute value, an elastic demand has an elasticity:

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

Question 71

Knowing the price elasticity of demand is important in business because it allows a manager to determine whether:

A) a price increase will cause total revenue to rise or fall.
B) an increase in supply will cause total profit to rise or fall.
C) a price increase will cause the quantity demanded to rise or fall.
D) a price increase will cause the demand to rise or fall.

Question 72

If a good has unitary price elasticity of demand, then the absolute value of the percentage change in

A) quantity exactly equals one.
B) price exactly equals one.
C) the quantity demanded equals the absolute value of the corresponding percentage change in price.
D) quantity demanded and the absolute value of the corresponding percentage change in price both equal one-half and total one.

Question 73

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand less than one indicates demand for the good is:

A) elastic.
B) inelastic.
C) unitary elastic.
D) unrelated to price.

Question 74

A good with a unit elastic demand has a:

A) perfectly horizontal demand curve.
B) perfectly vertical demand curve.
C) price elasticity greater than 1.
D) price elasticity equal to 1.

Question 75

Assuming elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an:

A) elastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
B) inelastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
C) elastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.
D) inelastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.

Question 76

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand greater than one indicates demand:

A) for the good is elastic.
B) for the good is inelastic.
C) for the good is unitary elastic.
D) cannot be determined without more information.

Question 77

The amount that a firm receives from the sale of goods and services is:

A) total profit.
B) total revenue.
C) total cost.
D) total benefit.

Question 78

In general, the more elastic a demand curve is the:

A) flatter it will be.
B) steeper it will be.
C) more bowed-in it will be.
D) faster it will shift when price changes.

Question 79

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of one indicates:

A) the percentage change in quantity demanded will equal the percentage change in price.
B) the percentage change in quantity demanded will equal one.
C) both the percentage change in price and quantity demanded must equal one.
D) the percentage change in quantity demanded and the percentage change in price must sum to one.

Question 80

If a manager multiplies the quantity sold by the price paid for each unit, the manager calculates:

A) total profit.
B) total revenue.
C) total cost.
D) total benefit.