Question 1

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 2

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

Accepted Answer

A

Question 3

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 the consumer's budgets.

Accepted Answer

If a good has many very good substitutes, consumers have many alternative options to choose from if the price of the good increases. This makes the demand more elastic as consumers are more likely to switch to a substitute if the price of the good increases.

Question 4

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 demand for bread will be inelastic because it is a staple food item and the price of bread is a small portion of the budget for most households. Therefore, even if the price of wheat increases, consumers will still be willing to purchase the same amount of bread.

Question 5

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 6

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 slope of demand curve D1 is steeper than the slope of demand curve D2. This means that a small change in price will cause a greater change in quantity demanded for D1 (since it is more responsive to price changes) compared to the change in quantity demanded for D2. Therefore, D1 is more elastic than D2.

Question 7

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 currently few substitutes for oil in its major uses, such as transportation and energy production, and demand for these uses is often considered essential and non-discretionary. As a result, changes in the price of oil generally have a limited impact on the quantity demanded, making it an inelastic good.

Question 8

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 demand and production costs.

Accepted Answer

The elasticity of demand tells us how responsive consumer purchases are to price changes. It is a measure of the percentage change in quantity demanded in response to a percentage change in price.

Question 9

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

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. This means it measures the responsiveness of quantity demanded to changes in the price of the product. Therefore, choice B is the correct answer.

Question 10

A) X; Y
B) Z; Y
C) X; Z
D) Y; X

Accepted Answer

The answer of 
A) X; Y
B) Z; Y
C) X; Z
D)...

Question 11

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 12

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 responds to a change in price. In other words, it measures the sensitivity of the quantity demanded to a change in price.

Question 13

If the price of gasoline in this country were expected to rise due to a permanent increase in the tax on gasoline, which of the following would you expect to happen?
A) The demand for gasoline would become more elastic.
B) The demand for gasoline would decrease as a result of the higher price.
C) Producers will have less of an incentive to supply gasoline as a result of the higher taxes.
D) The elasticity of demand will not change since gasoline is a necessity good.

Accepted Answer

The answer of If the price of gasoline in this...

Question 14

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 in production and has limited substitutes in the short run, so its demand tends to be inelastic. The other options (luxury sedans, candy, and Black Angus T-bone steak) may have more elastic demand as consumers may be willing to switch to substitutes or reduce their consumption if prices increase.

Question 15

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 presence of many good substitutes for Froot Loops makes the demand curve for Froot Loops breakfast cereal very elastic. This means that consumers are highly responsive to changes in the price of Froot Loops and are willing to switch to substitutes if the price of Froot Loops increases.

Question 16

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 17

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 a product are discovered, consumers have more options to choose from and can easily switch to a substitute if the price of the original product increases. This makes the demand curve more elastic as the quantity demanded is more responsive to changes in price.

Question 18

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) large decrease in price causes quantity demanded to decrease by a lot.
C) small increase in price causes quantity demanded to decrease by a lot.
D) small decrease in price causes quantity demanded to decrease by very little.

Accepted Answer

The demand curve for physician office visits being inelastic indicates that a change in price will not have a significant effect on the quantity demanded. Therefore, a large increase in price will cause only a very small decrease in quantity demanded. Conversely, a large decrease in price will not significantly increase the quantity demanded, as customers typically do not dramatically increase their usage of physician office visits simply because of a small price drop.

Question 19

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 20

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. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. A more elastic demand means that the quantity demanded is more sensitive to a change in price, while a less elastic demand means that the quantity demanded is less sensitive to a change in price.

Quiz 5: Elasticity and Its Applications

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

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

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

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

Why is the demand curve for oil rather inelastic?

The demand for oil is inelastic because there are:

The elasticity of demand:

The price elasticity of demand is:

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

The elasticity of demand measures how sensitive the:

If the price of gasoline in this country were expected to rise due to a permanent increase in the tax on gasoline, which of the following would you expect to happen?

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

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

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

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, a:

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

The elasticity of demand measures: