Question 1

Which one of the following products would tend to have inelastic demand?
A) luxury sedans
B) candy
C) crude oil
D) Black Angus T-bone steak

Accepted Answer

Crude oil is a necessary input for many industries and has few substitutes, making its demand relatively inelastic. The other products listed may have more substitutes and/or are considered luxury goods, making their demand more elastic.

Question 2

Which good below might be expected to have the most inelastic demand curve?
A) salt
B) women's blouses from Walmart
C) potato chips
D) Tylenol

Accepted Answer

A

Question 3

Figure: Demand Elasticities  Refer to the figure. It shows two different demand curves. Based on the graph, which statement is TRUE?
A) Elasticity of demand equals the slope of the curve so demand curve A is more elastic.
B) Elasticity of demand equals the slope of the curve so demand curve B is more elastic.
C) Since these two linear demand curves run through a common point we can say that at any given quantity, demand curve A is more elastic than curve B.
D) We cannot infer anything about elasticity from this diagram because slope does not equal elasticity.

Accepted Answer

C

Question 4

The demand for oil is inelastic because there are:
A) many complements for oil in its major use.
B) few complements for oil in its major use.
C) many substitutes for oil in its major use.
D) few substitutes for oil in its major use.

Accepted Answer

There are few substitutes for oil in its major use, such as gasoline for transportation, making the demand for oil inelastic. This means that changes in the price of oil will not significantly impact the quantity demanded.

Question 5

The demand curve for Froot Loops breakfast cereal is very elastic because:
A) most breakfast cereals are considered a luxury good.
B) there are many good substitutes for Froot Loops.
C) the demand curve is negatively sloped.
D) it is one of the most advertised cereals in the world.

Accepted Answer

The demand curve for Froot Loops breakfast cereal is very elastic because there are many good substitutes for Froot Loops. When there are a large number of close substitutes available, consumers are more likely to switch to an alternative product if the price of Froot Loops increases even slightly. This makes the demand curve for Froot Loops more elastic, meaning that a small change in price leads to a relatively large change in quantity demanded.

Question 6

The price of wheat increases, but few people cut back on their consumption of bread because:
A) the price of bread is a small portion of the budget, and thus the demand for bread is inelastic.
B) the price of bread is a large portion of the budget, and thus the demand for bread is elastic.
C) change in the price of wheat does not affect the price of bread.
D) None of the answers is correct.

Accepted Answer

The price of bread is a small portion of the budget, which means that people are willing to pay the increased price for wheat without significantly reducing their consumption of bread. The demand for bread is inelastic.

Question 7

The demand curve for oil is inelastic, meaning that the quantity of oil demanded:
A) rises by a lot even when the price of oil increases by only a little.
B) rises by only a little even when the price of oil increases by a lot.
C) falls by a lot even when the price of oil increases by only a little.
D) falls by only a little even when the price of oil increases by a lot.

Accepted Answer

The answer of The demand curve for oil is inelastic,...

Question 8

Which of the following factors causes a demand curve to become more elastic over time?
A) New substitutes for the product are discovered.
B) New and important uses for the product are discovered.
C) More producers begin to produce the product.
D) More consumers acquire a desire for the product.

Accepted Answer

When new substitutes for the product are discovered, consumers have more options to choose from and are less likely to continue purchasing the original product at the same price. This increases the elasticity of demand for the product.

Question 9

The demand curve for physician office visits is quite inelastic; therefore:
A) a large increase in price causes quantity demanded to decrease by very little.
B) a large decrease in price causes quantity demanded to decrease by a lot.
C) a small increase in price causes quantity demanded to decrease by a lot.
D) a small decrease in price causes quantity demanded to decrease by very little.

Accepted Answer

When the demand curve is inelastic, a change in price will result in a relatively smaller change in quantity demanded. In this case, a large increase in price will cause only a small decrease in the quantity of physician office visits demanded, indicating inelastic demand.

Question 10

All of the following conditions would cause the demand curve for a good to be more elastic EXCEPT:
A) a longer time horizon.
B) the good is considered a luxury good.
C) the price of the good falls.
D) the good has many substitutes.

Accepted Answer

The answer of All of the following conditions would cause...

Question 11

Table: Elasticity Characteristics $$\begin{array} { l l l } 
\hline \text { Good X } & \text { Good Y } & \text { Good Z } \
\hline \text { Few Substitutes } & \text { Many Substitutes } & \text { Few Substitutes } \
\text { Luxury good } & \text { Luxury good } & \text { Necessary good } \
\text { Small part of budget } & \text { Large part of budget } & \text { Small part of budget } \
\hline
\end{array}$$ The table lists the characteristics of three goods. Good ________ is the most inelastic, and Good ________ is the most elastic.
A) X; Y
B) Z; Y
C) X; Z
D) Y; X

Accepted Answer

Good Z is the most inelastic because it has few substitutes, is a necessary good, and takes up a small part of the budget. Good Y is the most elastic because it has many substitutes, is a luxury good, and takes up a large part of the budget.

Question 12

Why is the demand curve for oil rather inelastic?
A) There are few widely available good substitutes for oil.
B) To increase the production of oil requires a significant outlay of exploration and drilling costs.
C) The world supply of oil is low relative to demand.
D) The demand curve for oil is always perfectly inelastic.

Accepted Answer

The answer of Why is the demand curve for oil...

Question 13

Which of the following is a reason why the demand curve for an item would be more elastic?
A) The item is a necessity.
B) People's incomes are very high relative to the cost of the item.
C) The item has many very good substitutes.
D) The cost of the item forms a very small part of consumers' budgets.

Accepted Answer

If there are many good substitutes for an item, then consumers have more options and are more likely to switch to a different product if the price of the original item increases. This makes their demand for the original item more elastic.

Question 14

Figure: Price Elasticity of Demand  Refer to the figure. Which of the four demand curves has the greatest responsiveness to price changes?
A) A
B) B
C) C
D) D

Accepted Answer

The answer of Figure: Price Elasticity of Demand  Refer...

Question 15

Figure: Elasticity and Quantity Demanded Refer to the figure. An increase in price from $40 to $50 would cause the change in quantity demanded for D₁ to be: A) greater than the change in quantity demanded for D₂ so D₁ is more elastic than D₂. B) greater than the change in quantity demanded for D₂ so D₂ is more elastic than D₁. C) less than the change in quantity demanded for D₂ so D₁ is more inelastic than D₂. D) less than the change in quantity demanded for D₂ so D₂ is more inelastic than D₁.

Accepted Answer

The answer of Figure: Elasticity and Quantity Demanded  Refer...

Question 16

The elasticity of demand:
A) equals the inverse of price to quantity demanded.
B) measures how far the demand curve shifts from a change in price.
C) tells us how responsive consumer purchases are to price changes.
D) estimates the relationship between quantity demanded and production costs.

Accepted Answer

The elasticity of demand measures how responsive consumer purchases are to price changes. Option A is incorrect, as inverse of price to quantity demanded is the slope of the demand curve, not the elasticity. Option B is incorrect, as the shift in the demand curve is determined by factors other than price. Option D is incorrect, as the relationship between quantity demanded and production costs is captured by the supply curve, not the elasticity of demand.

Question 17

Which of the following would NOT make elasticity of demand for a good more elastic?
A) more substitutes
B) luxuries
C) large part of budget
D) less time

Accepted Answer

The answer of Which of the following would NOT make...

Question 18

The price elasticity of demand is:
A) the responsiveness of price to changes in the quantity demanded of the product.
B) the responsiveness of quantity demanded to changes in the price of the product.
C) the change in the firm's total revenue when prices change.
D) exactly the same as the slope of the demand curve.

Accepted Answer

Price elasticity of demand measures how much a change in price affects the quantity of a product demanded. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price. Therefore, option B correctly defines the concept.

Question 19

The elasticity of demand measures:
A) the height of the demand curve.
B) how sensitive the quantity demanded is to a change in price.
C) how sensitive the price is to a change in demand.
D) the extent to which demand shifts in response to supply changes.

Accepted Answer

The elasticity of demand measures how sensitive the quantity demanded is to a change in price. A higher elasticity means that a small change in price will result in a larger change in quantity demanded, indicating greater sensitivity to price changes.

Question 20

The elasticity of demand measures how sensitive the:
A) price is to a change in quantity demanded.
B) quantity demanded is to a change in price.
C) price is to a change in the quantity supplied.
D) demand is to a change in the number of suppliers.

Accepted Answer

The elasticity of demand measures how much the quantity demanded of a good or service changes in response to a change in its price. Therefore, option B is the correct answer as it states that the quantity demanded is sensitive or responsive to a change in price.

Quiz 5: Elasticity and Its Applications

Which one of the following products would tend to have inelastic demand?

Which good below might be expected to have the most inelastic demand curve?

Figure: Demand Elasticities Refer to the figure. It shows two different demand curves. Based on the graph, which statement is TRUE?

The demand for oil is inelastic because there are:

The demand curve for Froot Loops breakfast cereal is very elastic because:

The price of wheat increases, but few people cut back on their consumption of bread because:

The demand curve for oil is inelastic, meaning that the quantity of oil demanded:

Which of the following factors causes a demand curve to become more elastic over time?

The demand curve for physician office visits is quite inelastic; therefore:

All of the following conditions would cause the demand curve for a good to be more elastic EXCEPT:

Why is the demand curve for oil rather inelastic?

Which of the following is a reason why the demand curve for an item would be more elastic?

Figure: Price Elasticity of Demand Refer to the figure. Which of the four demand curves has the greatest responsiveness to price changes?

Figure: Elasticity and Quantity Demanded Refer to the figure. An increase in price from $40 to $50 would cause the change in quantity demanded for D1 to be:

The elasticity of demand:

Which of the following would NOT make elasticity of demand for a good more elastic?

The price elasticity of demand is:

The elasticity of demand measures:

The elasticity of demand measures how sensitive the:

Figure: Elasticity and Quantity Demanded Refer to the figure. An increase in price from $40 to $50 would cause the change in quantity demanded for D₁ to be: