Deck 19: Demand and Supply Elasticity

Question 1

The price elasticity of demand shows

A) the relationship between market price and household income.
B) the proportionate amount by which the quantity demanded changes in response to a proportionate change in price.
C) the quantity demanded at a given price.
D) the proportionate amount by which the price changes in response to a proportionate change in quantity demanded.

Answer 1

B

Question 2

If the price elasticity of demand for good A is -2, then a 1% increase in

A) consumer income will result in a 2% decrease in the demand for good A.
B) consumer income will result in a 2% increase in the demand for good A.
C) the market price of good A will result in a 2% increase in the quantity demanded of good A.
D) the market price of good A will result in a 2% decrease in the quantity demanded of good A.

Answer 2

D

Question 3

Which of the following statements about demand and price elasticity of demand is TRUE?

A) As the demand curve has a positive slope, the price elasticity of demand is positive.
B) As the demand curve has a negative slope, the price elasticity of demand is negative.
C) As the demand curve has a positive slope, the price elasticity of demand is negative.
D) As the demand curve has a negative slope, the price elasticity of demand is positive.

Answer 3

B

Question 4

An absolute price elasticity of demand equal to 4 indicates that a

A) 4 percent increase in price leads to a 10 percent decrease in quantity demanded.
B) 1 percent increase in price leads to a 4 percent decrease in quantity demanded.
C) 0.4 percent decrease in price leads to a 1 percent increase in quantity demanded.
D) 10 percent decrease in price leads to a 4 percent increase in quantity demanded.

Question 5

If the absolute price elasticity of demand is 2.0, a 10 percent decrease in price will increase quantity demanded by

A) 10 percent.
B) 20 percent.
C) 5 percent.
D) 12 percent.

Question 6

If price decreases by 10 percent and quantity demanded increases by 3 percent, the price elasticity of demand will be

A) 3.
B) 0.3.
C) 3.33.
D) 300.

Question 7

Suppose the quantity demanded of ice cream cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25. In this situation, the elasticity of demand, calculated using the average method, is

A) 3.
B) 1.
C) 0.33.
D) 1.33.

Question 8

The price elasticity of demand measures

A) the consumers' sensitivity to a price change.
B) the producers' sensitivity to a price change.
C) how much the market supply changes in response to a change in demand.
D) how much the demand changes in response to a change in income.

Question 9

The price elasticity of demand is

A) always positive, so there is no reason to consider the absolute value of the price elasticity of demand.
B) always negative, but by convention, economists typically express the price elasticity of demand as an absolute value.
C) always equal to -1, which by convention economists typically express as an absolute value, or 1.
D) always equal to zero, so there is no reason to consider the absolute value of the price elasticity of demand.

Question 10

Even though price elasticity of demand is always ________, by convention its absolute value is always discussed as a ________.

A) negative; prime number
B) positive; negative number
C) a fraction; whole number
D) negative; positive number

Question 11

The formal definition of price elasticity of demand is

A) change in quantity demanded divided by change in price.
B) quantity demanded divided by price.
C) percentage change in quantity demanded divided by percentage change in price.
D) quantity demanded multiplied by price and divided by 100.

Question 12

When economists want to obtain a measure of the responsiveness of quantity demanded to changes in price, they use

A) the slope of the demand curve.
B) the price elasticity of demand.
C) the unit change in quantity demanded.
D) the cross-price elasticity of demand.

Question 13

The price elasticity of demand is a measure of

A) the responsiveness of the quantity demanded of a good to a changes in the price of the good.
B) the quantity demanded of a good at a given price.
C) the demand for a product holding prices constant.
D) the horizontal shift in the demand curve when the price of a good changes.

Question 14

A 2 percent rise in the price of a good leads to a 4 percent decrease in quantity demanded. The absolute price elasticity of demand is

A) 2.
B) 0.5.
C) 20.
D) 5.

Question 15

If the absolute price elasticity of demand for good X is 0.5, when there is a 10 percent increase in price, we can conclude that quantity demanded

A) has fallen by 50 percent.
B) has fallen by 20 percent.
C) has fallen by 10 percent.
D) has fallen by 5 percent.

Question 16

Suppose that when the price of donuts rises 10%, the quantity demanded of donuts falls 3%. Based on this information, what is the approximate absolute price elasticity of demand for donuts?

A) 3.33
B) 0.3
C) 30
D) 1.3

Question 17

The local baseball stadium's concession stands previously sold hot dogs for 80 cents apiece. At that price, when a baseball fan went to watch a baseball game, he bought 2 hotdogs. But now that the stadium has a "dime-a-dog night," he has purchased 6 hot dogs. What is the approximate value of this individual's absolute price elasticity of demand for hot dogs?

A) 0.64
B) 0.80
C) 1.00
D) 1.56

Question 18

Six months ago, the price of gasoline was $2.20 per gallon. Now, the price is $2.40 per gallon. In response to this price increase, the number of gallons of gasoline purchased has declined by 2 percent. Based on this information, what is the absolute price elasticity of demand for gasoline?

A) 4.35
B) 1.20
C) 0.23
D) 0.10

Question 19

A good's price elasticity of demand can be calculated by using the formula of

A) percentage change in price divided by percentage change in quantity demanded.
B) percentage change in quantity demanded divided by percentage change in price.
C) percentage change in price divided by percentage change in income.
D) absolute change in quantity demanded divided by absolute change in price.

Question 20

When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

A) 0.15.
B) 0.60.
C) 0.73.
D) 1.67.

Question 21

When price is $5 per unit, quantity demanded is 12 units. When price is $6 per unit, quantity demanded is 8 units. The value of the absolute price elasticity of demand is approximately

A) 2.20.
B) 4.00.
C) 1.82.
D) 0.36.

Question 22

A value of the absolute price elasticity of demand equal to 0.5 indicates that

A) a 5 percent increase in price leads to a 10 percent decrease in quantity demanded.
B) a 10 percent increase in price leads to a 5 percent decrease in quantity demanded.
C) a 0.5 percent increase in price leads to a 1 percent decrease in quantity demanded.
D) a 1 percent increase in price leads to a 5 percent decrease in quantity demanded.

Question 23

A value of the absolute price elasticity of demand equal to 0.25 indicates that

A) a 10% decrease in price leads to a 4% increase in quantity demanded.
B) a 10% decrease in price leads to a 25% increase in quantity demanded.
C) a 1% decrease in price leads to a 2.5% increase in quantity demanded.
D) a 0.25% decrease in price leads to a 1% increase in quantity.

Question 24

The actual value of the price elasticity of demand is always

A) positive because of the law of demand.
B) negative because of the law of demand.
C) positive because of diminishing marginal utility.
D) negative because percentages can only be negative.

Question 25

The word best associated with price elasticity of demand is

A) relative.
B) total.
C) absolute.
D) unit.

Question 26

According to the above table, what is the absolute price elasticity of demand if price falls from $8.00 to $7.50?

A) 4.00
B) 2.82
C) 1.80
D) 1.21

Question 27

Absolute price elasticities are calculated for four goods, and the values are: 0.009; 1.0; 3.5; and 4. Which indicates the most price-responsive situation?

A) 0.009
B) 1.0
C) 3.5
D) 4.0

Question 28

A value of the absolute price elasticity of demand equal to 0.5 indicates that

A) a 0.5% decrease in price leads to a 1% increase in quantity demanded.
B) a 2% decrease in price leads to a 25% increase in quantity demanded.
C) a 1% increase in price leads to a 5% decrease in quantity demanded.
D) a 10% increase in price leads to a 5% decrease in quantity demanded.

Question 29

A 2 percent increase in the price of rice leads to a 2 percent decrease in the quantity demanded of rice. The absolute price elasticity of demand is

A) 3.
B) 1.
C) 0.1.
D) 6.

Question 30

A 10 percent increase in the price of portable power banks leads to a 5 percent decrease in the quantity demanded of portable power banks. The absolute price elasticity of demand is

A) 3.
B) 0.33.
C) 0.5.
D) 2.

Question 31

According to the above table, what is the absolute price elasticity of demand when price rises from $5.50 to $6?

A) 4.00
B) 2.23
C) 1.21
D) 0.50

Question 32

The price elasticity of demand is measured by the

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

Question 33

The responsiveness of quantity demanded of a good to changes in its price is the

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

Question 34

The quantity of raspberries sold at a local store increases from 100 pints to 1,500 pints when the price is reduced from $4.00 to $1.00. In this situation, the absolute price elasticity of demand for raspberries is approximately

A) 0.69.
B) 6.7.
C) 1.46.
D) 4.3.

Question 35

If the price of good A increases from $15 to $20 per unit and quantity demanded falls from 150 to 100 units, then by using the method of average values, we can calculate the absolute price elasticity of demand to be

A) 2.6.
B) 0.75.
C) 1.4.
D) 2.4.

Question 36

The price elasticity of demand measures

A) the responsiveness of quantity demanded to a change in price.
B) the responsiveness of price to a change in competition.
C) the change in quantity demanded due to a change consumer income.
D) the change in price due to a change in demand.

Question 37

A 10 percent increase in the price of tablets leads to a 1 percent decrease in the quantity demanded of tablets. The absolute price elasticity of demand for tablets is

A) 9.
B) 1.
C) 0.1.
D) 10.

Question 38

Suppose that the price of eggs increases from 75 cents to $1.00 per dozen and as a result a typical farmer experiences a decrease in egg sales from 300 to 200 dozen per week. Using the method of average values, the absolute price elasticity of demand is

A) 1.4.
B) 0.8.
C) 3.0.
D) 1.75.

Question 39

A 2 percent increase in the price of jeans leads to a 5 percent decrease in the quantity demanded of jeans. The absolute price elasticity of demand is

A) 2.5.
B) 1.
C) 0.4.
D) 0.2.

Question 40

The value of the absolute price elasticity of demand for good A is 4. The absolute price elasticity for good B is 1. Which good's quantity demanded is more responsive to a change in price?

A) Good A
B) Good B
C) They are equally responsive.
D) Not enough information is given.

Question 41

Gold is sold in world markets, usually priced in terms of troy ounces. In the market for gold, the price elasticity of demand for gold would be expressed as

A) the number of troy ounces of gold sold.
B) the number of whatever currency is used in purchasing the gold.
C) the number of dollars spent on gold.
D) a unitless number.

Question 42

The price elasticity of demand is the

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

Question 43

Refer to the above table. What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?

A) 1.60
B) 1.00
C) 0.65
D) 0.60

Question 44

Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

A) 0.85
B) 1.08
C) 1.17
D) 0.92

Question 45

Price elasticity of demand is the responsiveness of

A) the quantity demanded to a change in price.
B) demand to a change in supply.
C) demand to a change in income.
D) demand for a good to a change in the demand for another good.

Question 46

Refer to the above table. What is the absolute price elasticity of demand when a price rises from $9 to $9.50?

A) 0.35
B) 0.55
C) 2.57
D) 2.85

Question 47

Price elasticity of demand basically measures

A) the reliability of a product.
B) the responsiveness of consumers to price changes.
C) the variability of price changes.
D) the percentage change in market price as a result of a change in demand.

Question 48

Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?

A) 10
B) 1.38
C) 0.724
D) 0.1

Question 49

Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

A) 5.15
B) 1.94
C) 0.515
D) 0.194

Question 50

The result of the calculation of the price elasticity of demand is

A) always positive.
B) always negative.
C) sometimes positive, sometimes negative.
D) always greater than one.

Question 51

Refer to the above table. Demand is least price elastic at a price of

A) $10.00.
B) $7.50.
C) $7.00.
D) $5.00.

Question 52

Refer to the above table. Demand is unit elastic between the prices of

A) $5.00 and $10.00.
B) $6.00 and $7.00.
C) $6.00 and $6.50.
D) $7.00 and $7.50

Question 53

The more sensitive quantity demanded is to a change in price, the

A) smaller a change in price must be to induce a certain change in quantity demanded.
B) greater the absolute price elasticity of demand.
C) smaller the absolute price elasticity of demand.
D) closer the absolute price elasticity of demand is to zero.

Question 54

The actual value of price elasticity of demand

A) measures the relative change in quantity demanded when there is a change in price.
B) will change when the units good is measured in changes.
C) varies with changes in supply.
D) is always negative.

Question 55

The value of the absolute price elasticity of demand for good A is 3. The absolute price elasticity for good B is 2. Which good's quantity demanded is less responsive to a change in price?

A) Good A
B) Good B
C) They are equally responsive.
D) Not enough information is given.

Question 56

Relative percentage changes are used in measuring price elasticity of demand, so that

A) it does not matter whether price increases or decreases when calculating the elasticity.
B) it does not matter what units are used to measure prices or quantities.
C) we always obtain a positive number.
D) larger numbers indicate greater responsiveness.

Question 57

The price elasticity of demand can be computed as

A) change in total utility/change in quantity.
B) change in price/change in quantity demanded.
C) percentage change in quantity demanded/percentage change in price.
D) change in quantity demanded/change in price.

Question 58

Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

A) 0.72
B) 0.79
C) 1.38
D) 5.0

Question 59

The absolute price elasticity of demand for good A is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equal

A) 1200.
B) 12.
C) 1.2.
D) 0.8.

Question 60

If the price of gasoline increased by 5% and consumers responded by purchasing 5% less gasoline, the absolute value of price elasticity of demand for gasoline would equal

A) 0.1.
B) 0.5.
C) 5.
D) 1.

Question 61

Suppose that the absolute price elasticity for cookies equals 0.8. We could then say that the demand for cookies is

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

Question 62

If the absolute price elasticity of demand for automobiles is equal to 1.25, we say

A) that demand is elastic.
B) that demand is inelastic.
C) that there is a strong responsiveness of quantity demanded to automobiles price cuts.
D) none of the above is correct.

Question 63

If the price of coffee increases from $2.50 per cup to $3.00 per cup and the quantity demanded goes down from 120 cups per week to 115 cups per week, the absolute value of price elasticity of demand in that price range is approximately

A) 0.23.
B) 4.35.
C) 0.93.
D) 2.34.

Question 64

If the price of a cola increased by 12% and consumers responded by purchasing 24% less cola, the absolute value of price elasticity of demand for cola would be

A) 0.20.
B) 1.2.
C) 2.
D) 0.5.

Question 65

If the absolute price elasticity of demand for a product is less than 1, then

A) consumers are relatively sensitive to price changes.
B) consumers are relatively insensitive to price changes.
C) there is a positive relationship between price changes and the quality of the product.
D) producers are relatively insensitive to price changes.

Question 66

The price elasticity of demand is

A) always negative.
B) sometimes positive.
C) always positive.
D) positive or negative, depending on supply.

Question 67

If the price of gasoline goes up by 50% and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is

A) 0.25.
B) 0.50.
C) 0.75.
D) 1.00.

Question 68

The smaller is the absolute price elasticity of demand, the

A) smaller is the responsiveness of quantity demanded to the price change.
B) larger is the responsiveness to a price change.
C) larger is the income of the buyer.
D) higher is the change in demand to an income change.

Question 69

If the absolute price elasticity of demand for a product is less than 1, then

A) consumers are relatively insensitive to price changes.
B) consumers are relatively sensitive to price changes.
C) there is a positive relationship between price changes and total revenue.
D) producers are relatively insensitive to price changes.

Question 70

When demand is perfectly inelastic, the demand curve is

A) horizontal.
B) vertical.
C) upward sloping.
D) downward sloping.

Question 71

The price elasticity of demand measures

A) changes in demand.
B) how responsive market prices are to a change in demand.
C) how responsive consumers are to a change in price.
D) how responsive consumers are to a change in income.

Question 72

Consider the following data: Price of A Quantity Demanded of A
$5 6
$4 10
The absolute value of the price elasticity of demand for product A is

A) 0.44.
B) 1.80.
C) 0.56.
D) 2.25.

Question 73

If the absolute value of the price elasticity of demand for a product is less than 1, then

A) quantity demanded is very sensitive to price changes.
B) demand is inelastic.
C) demand is unit-elastic.
D) demand is elastic.

Question 74

If the absolute price elasticity of demand is 2.5, a 10 percent increase in the price will cause

A) the quantity demanded to decrease by 2.5 percent.
B) the quantity demanded to decrease by 25 percent.
C) the quantity demanded to decrease by 4 percent.
D) the quantity demanded to decrease by 40 percent.

Question 75

If the absolute value of the price elasticity of demand for a product is 2, and the price of a product increased 10 percent, then the quantity demanded will decline by

A) 20 percent.
B) 10 percent.
C) 5 percent.
D) 2 percent.

Question 76

Owners of a taco shop finds that they can sell 150 tacos a day when the price of a taco is $1.20. When they price tacos at $1, they sell 170 tacos. The absolute value of the price elasticity of demand for tacos is

A) 0.69.
B) 1.45.
C) 1.00.
D) infinity.

Question 77

When discussing the price elasticity of demand we generally refer to the absolute price elasticity of demand by consumers. This means that we will

A) disregard the law of demand.
B) ignore its relationship to demand.
C) disregard the minus sign.
D) consider absolute rather than relative changes.

Question 78

At a price of $10, quantity demanded is 30 units. When the price rises to $11, quantity demanded is 24 units. What is the absolute price elasticity of demand?

A) 0.5
B) 0.43
C) 2.33
D) 6.0

Question 79

If the absolute price elasticity of demand is 0.2, a 5 percent decrease in the price will cause

A) the quantity demanded to increase by 1 percent.
B) the quantity demanded to increase by 10 percent.
C) the quantity demanded to increase by 0.25 percent.
D) the quantity demanded to increase by 2.5 percent.

Question 80

If the price of nacho chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range is

A) 0.50.
B) 1.67.
C) 0.93.
D) 2.33.