Deck 5: Elasticity: a Measure of Responsiveness

Question 1

Assume Sarah is a CPA who earns $85,000 a year and her favorite entertainment magazine costs her $15 a year.For her,the price elasticity of demand for the magazine is likely to be:

A)elastic.
B)inelastic.
C)perfectly elastic.
D)none of the above.

Answer 1

B

Question 2

Refer to Figure 5.1.Using the initial-value method,if the price of a hamburger is increased from $2 to $4,the price elasticity of demand equals:

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

Answer 2

A

Question 3

Refer to Figure 5.2.Using the initial-value method,the value of the price elasticity of demand from point E to point F can be described as:

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

Answer 3

B

Question 4

The more substitutes there are for a product:

A)the less price elastic the demand for the product is.
B)the more price elastic the demand for the product is.
C)the greater the income elasticity for the product.
D)the smaller the income elasticity for the product.

Question 5

First Choice Cracker company needs to increase the price of crackers by 5%,based on a substantial increase in input costs such as flour.The price elasticity of demand for crackers is 0.4.The company can expect the consumption of cereal to:

A)decrease by 1.5%.
B)increase by 1.5%.
C)decrease by 2.0%.
D)increase by 2.0%.

Question 6

If the demand for pineapples is unit elastic,the value of the price elasticity of demand for pineapples is:

A)20.
B)2.0.
C)10.0.
D)1.0.

Question 7

Clear Window Manufacturer wants to increase the quantity of windows it sells by 10%.If the price elasticity of demand is 5 the manufacturer must:

A)increase price by 1.5%.
B)decrease price by 2.0%.
C)decrease price by 1.5%.
D)increase price by 2.0%.

Question 8

When the price of a car is $25,000,car sales are 10,000 per month.When the price of a car increases to $29,000,car sales fall to 8,000 per month.Using the initial-value method,the demand for cars is:

A)elastic.
B)inelastic.
C)unit elastic.
D)It is not possible to say based on the data given.

Question 9

The short run price elasticity of demand for gasoline is 0.5,and the long run price elasticity of demand for gasoline is 1.1.Demand for gasoline is ________ in the short run and ________ in the long run.

A)elastic;inelastic
B)inelastic;elastic
C)elastic;unitarily elastic
D)inelastic;unitarily inelastic

Question 10

When the price of milk increases 6%,quantity demanded decreases 4%.The elasticity for milk is:

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

Question 11

An Internet company wants to increase the consumption of Internet packages by 15%.The price elasticity of demand for Internet packages is 2.The telephone company should:

A)lower the price of Internet packages by 30.0%.
B)lower the price of Internet packages by 7.5%.
C)lower the price of Internet packages by 3.0%.
D)raise the price of Internet packages by 0.1%.

Question 12

Refer to Figure 5.2.Using the initial-value method,the value of the price elasticity of demand from point A to point B can be described as:

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

Question 13

When the price of bricks increases 5%,quantity demanded decreases 15%.The elasticity for bricks is:

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

Question 14

When Luna Hair Salon raised its hair cut prices by 10% because of an increase in rent cost,it lost a quarter of its customers.The price elasticity of demand for its hair cut is:

A)4.
B)0.25.
C)0.4.
D)2.5.

Question 15

Refer to Figure 5.1.Using the initial-value method,if the price of a hamburger is increased from $6 to $8,the price elasticity of demand equals:

A)0.7.
B)5.0.
C)1.0.
D)2.0.

Question 16

At a price of $4,a gas station.sold 100 gallons of gasoline per week.When the price rose to $4.5,only 80 gallons were sold per week.Using the initial-value method,the price elasticity of demand for gasoline at Greedy Inc.Gas Station is:

A)0.2.
B)0.16.
C)2.
D)1.6.

Question 17

Refer to Figure 5.1.Using the initial-value method,if the price of a hamburger is decreased from $10 to $8,the price elasticity of demand equals:

A)1.5.
B)5.0.
C)1.0.
D)2.0.

Question 18

At a price of $25,a store can sell 28 picture frames a day.If the price falls to $20,the store can sell 35 picture frames a day.Using the initial-value method,the price elasticity of demand is:

A)1.9.
B)2.5.
C)0.8.
D)1.25.

Question 19

The concept of elasticity applies to:

A)supply only.
B)demand only.
C)neither supply nor demand.
D)both supply and demand.

Question 20

When the price of a car is $25,000,car sales are 10,000 per month.When the price of a car increases to $29,000,car sales fall to 8,000 per month.Therefore,using initial value,a 1% increase in the price of the car will result in a ________ in the quantity demanded of cars.

A)1.67% decrease
B)1.25% decrease
C)0.8% decrease
D)0.8% increase

Question 21

If the demand for a product is perfectly elastic,then which of the following is most likely to be FALSE?

A)The product has many substitutes.
B)The demand curve for the good is horizontal.
C)The price elasticity of demand for that product is infinity.
D)None of the above is false.

Question 22

Refer to Figure 5.5.Using the midpoint method,if the price of a gardenburger is increased from $6 to $7,the price elasticity of demand equals:

A)0.13.
B)0.33.
C)1.44.
D)13.

Question 23

The demand for a product is:

A)more elastic if there are few substitutes for product.
B)more elastic if there are many substitutes for product.
C)more elastic if the product represents a small portion of the individual's budget.
D)B and C are correct.

Question 24

Goods for which the price elasticity of demand is relatively inelastic:

A)have many substitutes.
B)are purchased by low-income households.
C)tend to be luxury items.
D)have few substitutes.

Question 25

An increase in supply caused no change in the equilibrium quantity bought and sold.Thus,demand must be:

A)perfectly inelastic.
B)horizontal.
C)elastic.
D)unitary elastic.

Question 26

If the demand for a product is perfectly inelastic,then which of the following is most likely to be true?

A)The product is extremely important,or necessary,to those who buy it.
B)The product has many substitutes.
C)The demand curve for the good is horizontal.
D)The price elasticity of demand for that product is equal to one.

Question 27

Which of the following is likely to have an elastic demand?

A)salt
B)textbooks
C)coffee
D)movies

Question 28

Refer to Figure 5.4.The demand for tickets is:

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

Question 29

When the price of a pair of shoes is $80,10 pairs are demanded.When the price of the pair of shoes is $60,20 pairs are demanded.Using the initial value,the elasticity of demand is ________ starting at a price of $80 and ________ starting at a price of $60.

A)2;3
B)3/2;4
C)3;2
D)4;3/2

Question 30

Compared to the short run,the elasticity of demand in the long run is likely to:

A)decrease.
B)remain unitary elastic.
C)increase.
D)remain unchanged.

Question 31

A perfectly inelastic demand curve is shown as a:

A)horizontal line.
B)vertical line.
C)positively sloped line.
D)negatively sloped line.

Question 32

A medicine such as insulin would most likely have a price elasticity of demand:

A)equal to one.
B)close to zero.
C)greater than one in absolute value.
D)close to infinity.

Question 33

Refer to Figure 5.5.Using the midpoint method,if the price of a gardenburger is increased from $6 to $8,the price elasticity of demand equals:

A)0.024.
B)1.75.
C)1.9.
D)2.0.

Question 34

Which of the following is NOT likely to be an example of a product with an inelastic demand?

A)water
B)cars
C)cigarettes
D)eggs

Question 35

Refer to Figure 5.5.Using the midpoint method,if the price of a gardenburger is increased from $8 to $10,the price elasticity of demand equals:

A)0.036.
B)0.5.
C)4.5.
D)9.0.

Question 36

Elasticity of demand is:

A)the same as the slope of the demand curve.
B)the change in price for a given change in quantity demanded.
C)measured in dollars.
D)a measure of the percentage change in quantity demanded for a given percentage change in price.

Question 37

A perfectly elastic demand curve is shown as a:

A)horizontal line.
B)vertical line.
C)positively sloped line.
D)negatively sloped line.

Question 38

An increase in supply caused no change in the equilibrium price of a good.Thus,demand must be:

A)perfectly inelastic.
B)vertical.
C)perfectly elastic.
D)unitary elastic.

Question 39

Refer to Figure 5.3.At point C the price elasticity of demand is 1.Along line segment BC of the demand curve,the demand is:

A)elastic.
B)unitarily elastic.
C)inelastic.
D)either elastic or inelastic,depending on whether price increases or decreases.

Question 40

Which of the following individuals is likely to have the most inelastic demand for air travel?

A)a person who is afraid to fly
B)a person who enjoys flying
C)a business traveler
D)a retired person

Question 41

A perfectly elastic demand curve is a horizontal line.

Question 42

Define price elasticity of demand.What does it measure?

Question 43

Recall the Application regarding how the price elasticity of demand for gasoline varies over time.Based on the application,in the long run consumers have time respond to changes in price and the demand for gasoline is:

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

Question 44

The price elasticity of demand is constant along a downward-sloping linear demand curve.

Question 45

Another word for elasticity would be flexibility.

Question 46

If the price elasticity of demand is 3 then this means that a one-percentage increase in quantity demanded will cause a three-percentage decrease in the price of the good.

Question 47

When the price of toothpaste increases by 15 percent,the quantity of toothpaste demanded falls by 30 percent.Calculate the price elasticity of demand.Is the demand for toothpaste elastic,inelastic,or unit elastic?

Question 48

Which is likely to be more elastic: the demand for orange juice or the demand for a particular brand of orange juice? Explain.

Question 49

How does one determine whether demand is elastic,inelastic,or unitary elastic?

Question 50

The price of cabbage rises from $0.20 per pound to $0.30 per pound.The quantity of cabbage demanded falls from 800 pounds per week to 600 pounds per week.Use the initial value formula to calculate the price elasticity of demand for cabbage.Is the demand elastic,inelastic,or unit elastic?

Question 51

The price elasticity of demand is measured by dividing the percentage change in quantity demanded by the percentage change in price.

Question 52

If the price elasticity of demand for peanuts is 0.4,then the demand is inelastic.

Question 53

Refer to Figure 5.5.Using the midpoint method,if the price of a gardenburger is increased from $6 to $7,the price elasticity of demand equals:

A)0.13.
B)0.33.
C)1.44.
D)13.

Question 54

Based on the determinants of elasticity as discussed in the text,explain what the price elastic of demand of the following products would be: a)diamond rings;and b)salt.

Question 55

If the price elasticity of demand is 2 then a 4% increase in the price of the product can be expected to reduce quantity demanded by 8%.

Question 56

If the price of organic milk increases by 10% and quantity demanded falls by 20%,then the price elasticity of demand for organic milk is 2.

Question 57

Suppose that the price of a pound of potatoes increases from $0.75 to $0.90 and quantity demanded falls from 10,000 pounds to 8,000 pounds.Use the initial value method to calculate the price elasticity of demand.

Question 58

What does elasticity measure?

Question 59

List two determinants of price elasticity of demand.

Question 60

The price elasticity of demand for gasoline is 0.8.What must occur to the price of gasoline in order for quantity demanded to rise by 20 percent?

Question 61

Last semester there were 5000 parking spaces available on campus.The price of a parking permit was $80 per semester,and the quantity demanded equaled the quantity supplied at this price.Suppose the number of parking spaces increases by 10% and the elasticity of demand for parking is 0.5.Parking Services should ________ the price of a permit by ________ to guarantee that quantity demanded will equal quantity supplied.

A)decrease;10%
B)decrease;20%
C)decrease;5%
D)increase;10%

Question 62

What does it mean for a good to have a perfectly elastic demand? Draw a demand curve of this type.Explain why it has the shape that it does.

Question 63

A sandwich shop observes that when it increases the price of a sandwich,total revenue from sandwich sales increases,and when they lower the price of a sandwich,total revenue from taco sales decreases.This suggests:

A)the demand for sandwiches is inelastic.
B)the demand for sandwiches is elastic.
C)there are many good substitutes for sandwiches.
D)the law of demand is being violated.

Question 64

When the price of charcoal grills increases,total revenue increases for charcoal grill retailers.From this information,we can conclude that:

A)the law of demand does not hold.
B)the demand for charcoal grills is inelastic.
C)the supply of charcoal grills is inelastic.
D)corporations are greedy.

Question 65

Increasing cigarette prices has an impact on teenagers' consumption.Therefore,decreasing cigarette prices would:

A)increase teenagers' consumption.
B)allow for more law enforcement.
C)reduce teenagers' consumption.
D)increase the revenue from cigarette sales.

Question 66

Consider the market for Chinese food in a large city like Philadelphia.If the number of Chinese restaurants increases and the price elasticity of demand for Chinese food is 2.0,then the equilibrium price of Chinese food will ________,the equilibrium quantity demanded of Chinese food will ________,and total Chinese food revenue will ________.

A)decrease;increase;decrease
B)increase;decrease;increase
C)decrease;increase;increase
D)increase;decrease;decrease

Question 67

If the demand for horse race tickets is inelastic,then as the price of horse race tickets increases,quantity demanded of horse race tickets will ________ and total revenue will ________.

A)decrease significantly;increase
B)decrease slightly;increase
C)increase slightly;decrease
D)increase significantly;decrease

Question 68

Studio clothing store knows that the price elasticity of demand for its jeans is 2.5.If the price of jeans were to increase by 10%:

A)quantity demanded of jeans would rise by 25%.
B)quantity demanded of jeans would fall by 25%.
C)quantity demanded of jeans would rise by 4%.
D)quantity demanded of jeans would fall by 4%.

Question 69

When the price of milk increases,total revenue increases for milk retailers.From this information,we can conclude that:

A)the law of demand does not hold.
B)the demand for milk is inelastic.
C)the supply of milk is inelastic.
D)corporations are greedy.

Question 70

A game shop estimates that the price elasticity of demand on its newly released games is 2.0.In an effort to raise total revenue,the store should:

A)increase the price on its newly released games.
B)decrease the price on its newly released games.
C)increase the price on direct substitutes such as one-year-old games.
D)decrease the price on direct substitutes such as one-year-old games.

Question 71

If the demand for water is inelastic,then as the price of water falls,quantity demanded of water will ________ and total revenue will ________.

A)increase;increase
B)decrease;increase
C)decrease;decrease
D)increase;decrease

Question 72

What does it mean for a good to have a perfectly inelastic demand? Draw a demand curve of this type.Explain why it has the shape that it does.

Question 73

Is demand more elastic in the short run or the long run? Why?

Question 74

The price of a new smartphone falls from $500 to $450.The quantity of smartphones demanded rises from 1500,00 per year to 200,000 per year.Use the midpoint formula to calculate the price elasticity of demand for new smartphones.Is the demand elastic,inelastic,or unit elastic?

Question 75

Which of the following is a TRUE statement?

A)If demand is inelastic and the price increases,the total revenue will decrease.
B)If demand is inelastic and the price increases,the total revenue will increase.
C)If demand is elastic and the price increases,the total revenue will increase.
D)If demand is elastic and the price decreases,the quantity demanded will decrease.

Question 76

Maria raised the price of her burritos from $2.00 to $2.40 due to an increase on the price of cheese,one of the main ingredients.Her total revenue increased from $300 to $338.We can conclude that the demand for burritos is:

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

Question 77

The price elasticity of demand for tomatoes,is 1.2 during the summer.If a drought causes the price of tomatoes to increase 15%,farmers can expect quantity demanded to:

A)decrease by 18%.
B)increase by 18%.
C)decrease by 12.5%.
D)increase by 12.5%.

Question 78

Recall the application regarding how changing beer taxes affected highway deaths.What has happened to the beer tax since 1951?

A)It has increased.
B)It has decreased.
C)It has stayed the same.
D)The topic was not mentioned.

Question 79

If the demand for orange juice is elastic,then as the price falls,quantity demanded for orange juice will ________ and total revenue for orange suppliers will ________.

A)increase;increase
B)decrease;increase
C)decrease;decrease
D)increase;decrease

Question 80

Taxi fares in Cleveland are set by the city government.Suppose that the local taxi companies petition the city council to raise taxi fares.Despite the fact that higher fares will ________ the quantity demanded for taxi cab rides,the taxi companies must believe that demand for taxis is ________ and therefore that revenue will ________.

A)decrease;inelastic;increase
B)decrease;elastic;increase
C)decrease;inelastic;decrease
D)increase;inelastic;increase