Question 1

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:
A) perfectly elastic.
B) perfectly inelastic.
C) unitary elastic.
D) elastic.
E) inelastic.

Accepted Answer

The statement by the president suggests that a change in price will have no impact on the quantity demanded of Tucker cars, indicating that the price elasticity of demand is perfectly inelastic.

Question 2

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:
A) elastic.
B) inelastic, but not perfectly inelastic.
C) unitary elastic.
D) perfectly elastic.

Accepted Answer

The president believes that a 25 percent increase in tuition will raise revenues, indicating the belief that the quantity of students attending will not decrease enough to offset the higher price. This suggests the demand is inelastic (students' demand for attending the college is relatively insensitive to price changes), but not perfectly inelastic (which would mean demand does not change at all with price changes).

Question 3

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:
A) product A is more price elastic than product B.
B) product B is more price elastic than product A.
C) consumers are more sensitive to price changes in product A than in product B.
D) product B is more price inelastic than product A.
E) products A and B must be substitutes.

Accepted Answer

The answer of If the price elasticity of demand is...

Question 4

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?
A) 0.25.
B) 0.50.
C) 0.80.
D) 1.25

Accepted Answer

Using the midpoints formula, we have:

Change in quantity: (4000-6000)/((4000+6000)/2) = -0.33
Change in price: (10000-6000)/((10000+6000)/2) = 0.50

Price elasticity of demand = (-0.33)/(0.50) = -0.66

However, price elasticity is usually presented as a positive number, so we can take its absolute value:

|Price elasticity of demand| = 0.66

Therefore, the closest answer choice is C) 0.80.

Question 5

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:
A) elastic.
B) inelastic.
C) perfectly inelastic.
D) perfectly elastic.

Accepted Answer

If the percentage change in quantity demanded is greater than the percentage change in price, it means that consumers are very sensitive to changes in price and are likely to respond by buying more or less of the good depending on the direction of the price change. This is a characteristic of elastic demand.

Question 6

If demand price elasticity measures 2, this implies that consumers would:
A) buy twice as much of the product if the price drops 10 percent.
B) require a 2 percent drop in price to increase their purchases by 1 percent.
C) buy 2 percent more of the product in response to a 1 percent drop in price.
D) require at least a $2 increase in price before showing any response to the price increase.
E) buy twice as much of the product if the price drops 1 percent.

Accepted Answer

A demand price elasticity of 2 means that a 1% decrease in price would lead to a 2% increase in quantity demanded. In this case, a 1% drop in price would lead to a 2% increase in purchases, making option C the correct answer. Option A (buy twice as much of the product if the price drops 10 percent) is incorrect because it assumes that the relationship between price and quantity demanded is linear, which is not necessarily true for all products. Option B (require a 2 percent drop in price to increase their purchases by 1 percent) is incorrect because it implies a price elasticity of 0.5, not 2. Option D (require at least a $2 increase in price before showing any response to the price increase) is incorrect because it assumes a very low price elasticity, which is unlikely for most products. Option E (buy twice as much of the product if the price drops 1 percent) is incorrect because it assumes a price elasticity of 2 for a very small change in price, which is unlikely for most products.

Question 7

If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is:
A) price elastic.
B) price inelastic.
C) unitary elastic.
D) perfectly inelastic.

Accepted Answer

When a decrease in price leads to an increase in total revenue, it indicates that demand is price elastic, meaning that consumers are responsive to changes in price and are willing to buy more because of the lower price. This increase in demand more than offsets the lower price, resulting in higher total revenue for the theater. Conversely, if demand were price inelastic, a lower price would lead to a smaller increase in quantity demanded, resulting in a decrease in total revenue.

Question 8

The price elasticity of demand for a vertical demand curve is:
A) perfectly elastic.
B) perfectly inelastic.
C) unitary elastic.
D) elastic.
E) inelastic.

Accepted Answer

For a vertical demand curve, the price remains constant regardless of the quantity demanded. This means that the percentage change in quantity demanded is always zero, making the price elasticity of demand equal to zero. A price elasticity of zero indicates perfectly inelastic demand.

Question 9

Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1, between points a and b, the price elasticity of demand measures:
A) 0.67.
B) 1.5.
C) 2.0.
D) 1.56.
E) 1.0.

Accepted Answer

The answer of Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1,...

Question 10

Along the elastic range of a demand curve, a decrease in price causes:
A) no change in total revenue.
B) a decrease in total revenue.
C) an increase in total revenue.
D) an unpredictable change in total revenue.

Accepted Answer

Along the elastic range of a demand curve, a decrease in price causes an increase in quantity demanded, which leads to an increase in total revenue. This is because the increase in quantity demanded at the lower price outweighs the decrease in price per unit, resulting in a higher total revenue.

Question 11

Suppose Good Food's supermarket raises the price of its steak and finds its total revenue from steak sales does not change. This is evidence that price elasticity of demand for steak is:
A) perfectly elastic.
B) perfectly inelastic.
C) unitary elastic.
D) inelastic.
E) elastic.

Accepted Answer

When total revenue remains unchanged after a price change, it indicates that the price elasticity of demand is unitary elastic, meaning the percentage change in quantity demanded is equal to the percentage change in price.

Question 12

If the demand curve is unit elastic, this implies that:
A) consumers do not react to a change in product price.
B) the good can only be purchased in units of 1.
C) this good has no good substitutes.
D) the good is a basic food staple.
E) the percentage change in the quantity demanded = the percentage change in product price.

Accepted Answer

A unit elastic demand curve means that the percentage change in quantity demanded is equal to the percentage change in price. This suggests that consumers are very sensitive to changes in price and will adjust their quantity demanded accordingly.

Question 13

If the demand curve over a certain range is "price elastic," this implies that the:
A) percentage change in the quantity demanded exceeds one.
B) percentage change in the quantity demanded exceeds the percentage change in product price.
C) percentage change in price exceeds the percentage change in quantity demanded.
D) product is non-reactive.
E) product has no good substitute.

Accepted Answer

Price elasticity of demand refers to the sensitivity of quantity demanded to changes in product price. If the demand curve is price elastic, it means that a small percentage change in price results in a larger percentage change in quantity demanded. Mathematically, this is expressed as the percentage change in quantity demanded being greater than the percentage change in price (i.e. percentage change in quantity demanded/percentage change in price > 1). Therefore, option B is the correct answer.

Question 14

Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1, the demand curve between points b and c is:
A) price elastic.
B) price inelastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.

Accepted Answer

The answer of Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1,...

Question 15

Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1, the demand curve between points a and b is:
A) price elastic.
B) price inelastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.

Accepted Answer

The answer of Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1,...

Question 16

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:
A) elastic.
B) inelastic.
C) perfectly inelastic.
D) unitary elastic.

Accepted Answer

When the percentage change in quantity demanded is less than the percentage change in price, the elasticity of demand is considered to be inelastic. This means that the change in price has a relatively smaller impact on the demand for the product. In other words, buyers are less sensitive to changes in price, and therefore a change in price will not significantly alter the quantity demanded.

Question 17

Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1, between points b and c, the price elasticity of demand measures
A) 4.27.
B) 1.5.
C) 1.56.
D) 0.636.
E) 0.425.

Accepted Answer

The answer of Exhibit 5-1 Demand curve
​ 
-In Exhibit 5-1,...

Question 18

Demand price elasticity measures:
A) how much supply will change as price changes.
B) how consumers change their purchases in response to a change in income.
C) how consumers change their purchases in response to a change in the price of a substitute good.
D) how consumers change their purchases in response to a change in the price of a product.
E) the change in price brought about by a change in consumer demand.

Accepted Answer

Demand price elasticity measures how consumers change their purchases in response to a change in the price of a product. It is a measure of the sensitivity of the quantity of a good or service demanded to a change in its price. It is calculated by dividing the percentage change in the quantity demanded by the percentage change in price.

Question 19

Along the elastic range of a demand curve, a price change causes:
A) a change in total revenue in the opposite direction.
B) a change in total revenue in the same direction.
C) no change in total revenue.
D) an unpredictable change in the total revenue.

Accepted Answer

The answer of Along the elastic range of a demand...

Question 20

If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity of demand is:
A) elastic.
B) inelastic.
C) perfectly elastic.
D) unitary elastic.

Accepted Answer

A percentage change in quantity demanded that equals a percentage change in price indicates a unitary elastic demand, meaning that the change in quantity demanded is proportional to the change in price.

Quiz 5: Price Elasticity of Demand and Supply

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

If demand price elasticity measures 2, this implies that consumers would:

If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is:

The price elasticity of demand for a vertical demand curve is:

Exhibit 5-1 Demand curve -In Exhibit 5-1, between points a and b, the price elasticity of demand measures:

Along the elastic range of a demand curve, a decrease in price causes:

Suppose Good Food's supermarket raises the price of its steak and finds its total revenue from steak sales does not change. This is evidence that price elasticity of demand for steak is:

If the demand curve is unit elastic, this implies that:

If the demand curve over a certain range is "price elastic," this implies that the:

Exhibit 5-1 Demand curve -In Exhibit 5-1, the demand curve between points b and c is:

Exhibit 5-1 Demand curve -In Exhibit 5-1, the demand curve between points a and b is:

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:

Exhibit 5-1 Demand curve -In Exhibit 5-1, between points b and c, the price elasticity of demand measures

Demand price elasticity measures:

Along the elastic range of a demand curve, a price change causes:

If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity of demand is:

Quiz 5: Price Elasticity of Demand and Supply

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

If demand price elasticity measures 2, this implies that consumers would:

If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is:

The price elasticity of demand for a vertical demand curve is:

Exhibit 5-1 Demand curve ​ -In Exhibit 5-1, between points a and b, the price elasticity of demand measures:

Along the elastic range of a demand curve, a decrease in price causes:

Suppose Good Food's supermarket raises the price of its steak and finds its total revenue from steak sales does not change. This is evidence that price elasticity of demand for steak is:

If the demand curve is unit elastic, this implies that:

If the demand curve over a certain range is "price elastic," this implies that the:

Exhibit 5-1 Demand curve ​ -In Exhibit 5-1, the demand curve between points b and c is:

Exhibit 5-1 Demand curve ​ -In Exhibit 5-1, the demand curve between points a and b is:

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:

Exhibit 5-1 Demand curve ​ -In Exhibit 5-1, between points b and c, the price elasticity of demand measures

Demand price elasticity measures:

Along the elastic range of a demand curve, a price change causes:

If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity of demand is:

Exhibit 5-1 Demand curve -In Exhibit 5-1, between points a and b, the price elasticity of demand measures:

Exhibit 5-1 Demand curve -In Exhibit 5-1, the demand curve between points b and c is:

Exhibit 5-1 Demand curve -In Exhibit 5-1, the demand curve between points a and b is:

Exhibit 5-1 Demand curve -In Exhibit 5-1, between points b and c, the price elasticity of demand measures