Question 1

The demand for good A is unit elastic if
A)a 5 percent fall in the price of A results in an infinite increase in the quantity of A demanded.
B)a 5 percent rise in the price of A results in a 10 percent decrease in the quantity of A demanded.
C)any increase in the price of A results in a 1 percent decrease in the quantity of A demanded.
D)a 5 percent rise in the price of A results in no change in the quantity of A demanded.
E)a 5 percent rise in the price of A results in a 5 percent decrease in the quantity of A demanded.

Accepted Answer

Unit elasticity of demand means that the percentage change in price is equal to the percentage change in quantity demanded. Therefore, a 5 percent rise in price leading to a 5 percent decrease in quantity demanded indicates unit elasticity. Choice E fits this criteria.

Question 2

If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded, the price elasticity of demand is
A)0.8.
B)1.25.
C)8.
D)0.125.
E)80.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is (-8% / 10%) = -0.8. The negative sign indicates the inverse relationship between price and quantity demanded, but the magnitude (0.8) is what's typically reported for elasticity.

Question 3

The price elasticity of demand is a units-free measure of the responsiveness of the ________ when all other influences on buying plans remain the same.
A)quantity demanded to a change in the price of a substitute or complement
B)quantity demanded to a change in income
C)quantity demanded of a good to a change in its price
D)price to a change in quantity demanded
E)quantity demanded of a good to a change in supply

Accepted Answer

The definition given in the question perfectly matches with the definition of price elasticity of demand, which measures the percentage change in quantity demanded of a good to a percentage change in its price, while keeping all other factors constant. Therefore, option C is the best fit as the answer.

Question 4

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a
A)2 percent decrease in quantity demanded.
B)20 percent decrease in quantity demanded.
C)5 percent decrease in quantity demanded.
D)2 percent increase in quantity demanded.
E)20 percent increase in quantity demanded.

Accepted Answer

A price elasticity of demand of 2 means that a 1% increase in price will result in a 2% decrease in quantity demanded. Therefore, a 10% increase in price will result in a 20% decrease in quantity demanded.

Question 5

A fall in the price of a good from $10.50 to $9.50 results in an increase in the quantity demanded from 18,800 to 21,200 units. The price elasticity of demand is
A)0.8.
B)1.25.
C)1.2.
D)8.0.
E)2.4.

Accepted Answer

The answer of A fall in the price of a...

Question 6

The price of apples falls by 5 percent and quantity of apples demanded increases by 6 percent. We conclude that the demand for apples is
A)perfectly elastic.
B)unit elastic.
C)elastic.
D)perfectly inelastic.
E)inelastic.

Accepted Answer

When the price of apples falls by 5% and the quantity demanded of apples increases by 6%, we can determine the elasticity of demand through the following formula:

Elasticity of demand = (% change in quantity demanded) / (% change in price)

Using this formula, we can determine that the elasticity of demand for apples is:

Elasticity of demand = (6%) / (-5%) = -1.2

Since the elasticity of demand is greater than 1, we can conclude that the demand for apples is elastic.

Question 7

A unit elastic demand
A)means that the ratio of a change in quantity demanded to a change in price is equal to 1.
B)means that the ratio of a percentage change in quantity demanded to a percentage change in price is equal to 1.
C)means that the ratio of a change in price to a change in quantity demanded is equal to 1.
D)is illustrated by a horizontal demand curve.
E)is illustrated by a vertical demand curve.

Accepted Answer

A unit elastic demand means that the ratio of a percentage change in quantity demanded to a percentage change in price is equal to 1. This indicates that the change in price and quantity demanded will result in an equal change in revenue for the seller.

Question 8

Which one of the following illustrates an elastic demand?
A)A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.
B)A 10 percent rise in price leads to a 20 percent decrease in quantity demanded.
C)A price elasticity of demand equal to 0.2
D)A price elasticity of demand equal to 1.0
E)A price elasticity of demand equal to zero

Accepted Answer

An elastic demand is when a small change in price leads to a relatively large change in quantity demanded. In this case, a 10 percent rise in price leads to a 20 percent decrease in quantity demanded, which is a large change, indicating elasticity of demand.

Question 9

Which one of the following illustrates an inelastic demand?
A)A 10 percent rise in price leads to a 5 percent decrease in quantity demanded.
B)A 10 percent rise in price leads to a 20 percent decrease in quantity demanded.
C)A price elasticity of demand equal to infinity
D)A price elasticity of demand equal to 1.0.
E)A price elasticity of demand equal to 2.0

Accepted Answer

Inelastic demand is characterized by a smaller percentage change in quantity demanded than the percentage change in price, which is exactly what is described in option A (a 10 percent rise in price leads to only a 5 percent decrease in quantity demanded).

Question 10

The price of plums falls by 7 percent and quantity of plums demanded increases by 6.75 percent. We conclude that the demand for plums is
A)inelastic.
B)perfectly elastic.
C)perfectly inelastic.
D)elastic.
E)unit elastic.

Accepted Answer

The demand for plums is inelastic because the percentage change in quantity demanded (6.75%) is less than the percentage change in price (7%).

Question 11

If the demand curve for a good is a horizontal line, then the good has
A)zero income elasticity.
B)price elasticity of demand equal to zero.
C)infinite price elasticity of demand.
D)a price elasticity of demand that is likely to rise in the short run.
E)a price elasticity of demand that is likely to fall in the short run.

Accepted Answer

A horizontal demand curve indicates that the good has infinite price elasticity of demand, meaning consumers will only buy at one price and any change in price will result in zero quantity demanded.

Question 12

Demand is inelastic if
A)a small change in price results in a large change in quantity demanded.
B)the quantity demanded is very responsive to a change in price.
C)the price elasticity of demand is 0.2.
D)the price does not change when supply increases.
E)a 10 percent change in price results in a 1 percent change in the quantity supplied.

Accepted Answer

A price elasticity of demand of 0.2 indicates that a small change in price only results in a small change in quantity demanded, making the demand inelastic. Choices A, B, D, and E are incorrect because they describe characteristics of elastic demand.

Question 13

Suppose a rise in the price of a good from $6.50 to $7.50 leads to a decrease in the quantity demanded from 10,500 to 9,500 units. In this range of demand, the price elasticity of demand is
A)14.
B)7.
C)1,000.
D)1.
E)0.7.

Accepted Answer

The price elasticity of demand can be calculated using the formula:

Price elasticity of demand = (percentage change in quantity demanded) / (percentage change in price)

Here, the price has increased from $6.50 to $7.50, which is a percentage increase of (7.50-6.50)/6.50 * 100 = 15.38%.

The quantity demanded has decreased from 10,500 to 9,500, which is a percentage decrease of (9,500-10,500)/10,500 * 100 = -9.52%.

Using these figures in the formula, we get:

Price elasticity of demand = (-9.52%) / (15.38%) = -0.62

Since this value is negative, we take the absolute value to get:

Price elasticity of demand = 0.62

Since this value is less than 1, we can say that the demand is inelastic in this range. Therefore, the answer is E) 0.7.

Question 14

If a 12 percent fall in price results in an 8 percent increase in quantity demanded, the price elasticity of demand equals
A)0.96.
B)0.12.
C)0.67.
D)1.5.
E)0.8.

Accepted Answer

Price elasticity of demand = percentage change in quantity demanded / percentage change in price
Here, we are given that when the price falls by 12%, the quantity demanded increases by 8%. Therefore, the percentage change in quantity demanded is 8% and the percentage change in price is -12%. 
Plugging these values in the formula, we get:
Price elasticity of demand = 8% / (-12%) = -0.67
However, we need a positive value for price elasticity of demand. So, taking the absolute value of -0.67, we get 0.67. Therefore, the price elasticity of demand equals 0.67.

Question 15

The price of good A falls by 10 percent and quantity of good A demanded does not change. We conclude that the demand for good A is
A)perfectly elastic.
B)inelastic.
C)perfectly inelastic.
D)elastic.
E)unit elastic.

Accepted Answer

The demand for good A is perfectly inelastic because the quantity demanded does not change despite a change in price.

Question 16

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the
A)cross elasticity of demand.
B)income elasticity of demand.
C)substitute elasticity of demand.
D)price elasticity of demand.
E)elasticity of supply.

Accepted Answer

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is price elasticity of demand.

Question 17

The price of oranges rises by 3 percent and quantity of oranges demanded decreases by 3 percent. We conclude that the demand for oranges is
A)inelastic.
B)elastic.
C)perfectly inelastic.
D)perfect elastic.
E)unit elastic.

Accepted Answer

The demand is unit elastic because the percentage change in quantity demanded is equal to the percentage change in price.

Question 18

If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity demanded, the demand curve for this good
A)is vertical.
B)is horizontal.
C)has slope equal to 1.
D)is a straight line with slope equal to 10.
E)none of the above

Accepted Answer

The demand curve is unit elastic, meaning the percentage change in price leads to an equal percentage change in quantity demanded, but this does not imply any of the specific shapes or slopes mentioned in the other options.

Question 19

If a large percentage drop in the price level results in a small percentage increase in the quantity demanded,
A)demand is inelastic.
B)demand is elastic.
C)demand is unit elastic.
D)the price elasticity of demand is close to infinity.
E)the price elasticity of demand is zero.

Accepted Answer

Inelastic demand is characterized by a situation where a large percentage change in price results in a relatively small percentage change in the quantity demanded. Therefore, if a large percentage drop in the price level results in a small percentage increase in the quantity demanded, the demand is inelastic.

Question 20

A fall in the price of a good from $11.50 to $8.50 results in an increase in the quantity demanded from 19,200 to 20,800 units. The price elasticity of demand is
A)0.27.
B)3.75.
C)0.08.
D)8.0.
E)30.

Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((20,800 - 19,200) / 19,200) = 0.0833, and the percentage change in price is ((8.50 - 11.50) / 11.50) = -0.2609. The elasticity is 0.0833 / -0.2609 = -0.319, which is approximately 0.27 when considering the absolute value.

Quiz 4: Elasticity

The demand for good A is unit elastic if

If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded, the price elasticity of demand is

The price elasticity of demand is a units-free measure of the responsiveness of the ________ when all other influences on buying plans remain the same.

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a

A fall in the price of a good from $10.50 to $9.50 results in an increase in the quantity demanded from 18,800 to 21,200 units. The price elasticity of demand is

The price of apples falls by 5 percent and quantity of apples demanded increases by 6 percent. We conclude that the demand for apples is

A unit elastic demand

Which one of the following illustrates an elastic demand?

Which one of the following illustrates an inelastic demand?

The price of plums falls by 7 percent and quantity of plums demanded increases by 6.75 percent. We conclude that the demand for plums is

If the demand curve for a good is a horizontal line, then the good has

Demand is inelastic if

Suppose a rise in the price of a good from $6.50 to $7.50 leads to a decrease in the quantity demanded from 10,500 to 9,500 units. In this range of demand, the price elasticity of demand is

If a 12 percent fall in price results in an 8 percent increase in quantity demanded, the price elasticity of demand equals

The price of good A falls by 10 percent and quantity of good A demanded does not change. We conclude that the demand for good A is

The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the

The price of oranges rises by 3 percent and quantity of oranges demanded decreases by 3 percent. We conclude that the demand for oranges is

If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity demanded, the demand curve for this good

If a large percentage drop in the price level results in a small percentage increase in the quantity demanded,

A fall in the price of a good from $11.50 to $8.50 results in an increase in the quantity demanded from 19,200 to 20,800 units. The price elasticity of demand is