Question 1

Which of the following statements about price elasticity of demand is false?
A)The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope.
B)If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic.
C)The value of the price elasticity of demand along a downward-sloping demand curve is always negative.
D)A linear downward-sloping demand curve has a varying price elasticity coefficient.

Accepted Answer

A

Question 2

Figure 6-1
 
-Refer to Figure 6-1.A perfectly elastic demand curve is shown in
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

B

Question 3

Suppose the value of the price elasticity of demand is -3.What does this mean?
A)A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.
B)A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
C)A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.
D)A $1 increase in price causes quantity demanded to fall by 3 units.

Accepted Answer

A price elasticity of demand of -3 means that a 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. This indicates that the demand for the good is relatively elastic, as even a small increase in price results in a relatively large decrease in quantity demanded.

Question 4

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is
A)zero.
B)less than one.
C)more than one.
D)equal to the absolute value of the slope of the demand curve.

Accepted Answer

Perfectly inelastic demand means that consumers will buy the same quantity of a good or service regardless of changes in price. This means that the percentage change in quantity demanded is zero, which makes the price elasticity of demand equal to zero. Therefore, the answer is A) zero.

Question 5

Figure 6-4
 
-Refer to Figure 6-4.Which of the following statements about price elasticity of demand is true?
A)The elasticity coefficient is constant along the demand curve.
B)The elastic portion of a straight-line, downward-sloping demand curve corresponds to the segment above the midpoint.
C)The inelastic portion of the demand curve corresponds to the segment above the midpoint.
D)At the midpoint of the demand curve, the elasticity coefficient is zero.

Accepted Answer

The elastic portion of a straight-line, downward-sloping demand curve corresponds to the segment above the midpoint. This is because the elasticity coefficient, which measures the responsiveness of quantity demanded to a change in price, is greater than one in this segment. Conversely, the inelastic portion of the demand curve corresponds to the segment below the midpoint, where the elasticity coefficient is less than one. The elasticity coefficient is not constant along the demand curve, and it is undefined or infinite at the midpoint of a straight-line demand curve.

Question 6

Figure 6-3
 
-Refer to Figure 6-3.Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.
A)0.32
B)0.4
C)2.5
D)3.125

Accepted Answer

Using the midpoint formula:

Price elasticity of demand = [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]
 
= [((260 - 200) / ((260 + 200)/2))] / [((2.5 - 1.5) / ((2.5 + 1.5)/2))]

= [((60/230)) / ((1/2))]

= 3.125 (absolute value)

Therefore, the correct answer is D, 3.125.

Question 7

If demand is inelastic, the absolute value of the price elasticity of demand is
A)one.
B)less than one.
C)greater than one.
D)greater than the absolute value of the slope of the demand curve.

Accepted Answer

If demand is inelastic, the absolute value of the price elasticity of demand is less than one. This means that the percentage change in quantity demanded is smaller than the percentage change in price. Therefore, a change in price will not have a significant impact on the quantity demanded.

Question 8

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?
A)0.11
B)0.37
C)2.69
D)9.33

Accepted Answer

Using the formula for price elasticity of demand:
|Elasticity| = % change in quantity demanded / % change in price

% change in quantity demanded = (240-800)/800 = -0.7
% change in price = (180-120)/120 = 0.5

Plugging in the numbers:
|Elasticity| = |-0.7/0.5| = 1.4

However, since demand is decreasing when price increases, we take the absolute value to get the final answer:
|Elasticity| = 2.69

Therefore, the best choice is (C) 2.69.

Question 9

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase, quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?
A)40 percent
B)25 percent
C)2.5 percent
D)0.4 percent

Accepted Answer

The answer of The price elasticity of demand for Stork...

Question 10

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?
A)It is elastic.
B)It is perfectly elastic.
C)It is perfectly inelastic.
D)The price elasticity coefficient is 0.

Accepted Answer

The answer of Jenna runs a small boutique in Capitola.She...

Question 11

Perfectly inelastic demand is represented by a demand curve which is ________, and relatively inelastic demand is represented by a demand curve which is ________.
A)downward sloping; vertical
B)horizontal; downward sloping
C)vertical; downward sloping
D)upward sloping; horizontal

Accepted Answer

Perfectly inelastic demand means that no matter what the price is, the quantity demanded will remain the same. This is represented by a vertical demand curve, which means that the quantity demanded does not change when the price changes. On the other hand, relatively inelastic demand means that the quantity demanded changes slightly in response to a change in price, and is represented by a steep (or downward sloping) demand curve. Therefore, option C is the correct answer as it correctly identifies a vertical demand curve as representing perfectly inelastic demand, and a downward sloping demand curve as representing relatively inelastic demand.

Question 12

In December 2014, the average price of gasoline in the United States was $2.50 per gallon and consumers bought 7 percent more gasoline than they had during April 2014, when the average price was $3.60 per gallon.Based on these numbers, what was the price elasticity of demand for gasoline from April 2014 to December 2014?
A)-0.02
B)-0.19
C)-1.01
D)-2.26

Accepted Answer

The answer of In December 2014, the average price of...

Question 13

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20, the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.
A)1.67
B)1.0
C)0.6
D)0.53

Accepted Answer

The answer of Jaycee Jeans sold 40 pairs of jeans...

Question 14

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded
A)will increase by 45 percent.
B)will increase by 5 percent.
C)will decrease by 45 percent.
D)will decrease by 5 percent.

Accepted Answer

According to the price elasticity of demand formula, percentage change in quantity demanded = price elasticity of demand x percentage change in price.
Thus, if the percentage increase in price is 15%, then the percentage change in price is 15%. Using the formula, we can calculate the percentage change in quantity demanded as:
-3 x 15% = -45%
This means that quantity demanded will decrease by 45%, which is option C.

Question 15

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.
A)0.17
B)0.62
C)1.62
D)5

Accepted Answer

The answer of If 50 units are sold at a...

Question 16

Price elasticity of demand measures
A)how responsive suppliers are to price changes.
B)how responsive sales are to changes in the price of a related good.
C)how responsive quantity demanded is to a change in price.
D)how responsive sales are to a change in buyers' incomes.

Accepted Answer

Price elasticity of demand measures how sensitive or responsive the quantity demanded is to a change in price. It shows the percentage change in quantity demanded for every percentage change in price. It is used to determine how much the demand for a good or service changes when the price changes.

Question 17

Figure 6-1
 
-Refer to Figure 6-1.The demand curve on which elasticity changes at every point is given in
A)Panel A.
B)Panel B.
C)Panel C.
D)none of the above graphs.

Accepted Answer

The answer of Figure 6-1
 
-Refer to Figure 6-1.The demand...

Question 18

Figure 6-1
 
-Refer to Figure 6-1.A perfectly inelastic demand curve is shown in
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

A perfectly inelastic demand curve is shown in Panel A as the quantity demanded remains the same regardless of changes in the price, meaning the elasticity of demand is zero. Panels B, C, and D all show some degree of price responsiveness in the quantity demanded, indicating that they are not perfectly inelastic demand curves.

Question 19

Figure 6-2
 
-Refer to Figure 6-2.The absolute value of the price elasticity of demand at points a and b is 1.What is the value of Pb?
A)$50
B)$40
C)$30
D)$20

Accepted Answer

We know that the absolute value of price elasticity of demand (|Ed|) is equal to 1 at points a and b. At point b, the price (Pb) is $40 and the quantity demanded (Qb) is 60. Using the midpoint formula, we can calculate the price elasticity of demand between points a and b as:
|Ed| = [(Qb-Qa)/((Qb+Qa)/2)] / [(Pb-Pa)/((Pb+Pa)/2)]
1 = [(60-90)/((60+90)/2)] / [(40-50)/((40+50)/2)]
1 = [-1/3] / [-0.12]
1 = 2.78
This is a contradiction, since we know that |Ed| = 1 at point b. Therefore, the given information is inconsistent and cannot be used to determine the value of Pb.

Question 20

Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to "feed his muscles" every day.On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?
A)It is elastic.
B)It is perfectly elastic.
C)It is perfectly inelastic.
D)The price elasticity coefficient is 1.

Accepted Answer

Since Seth says he has to have his 12-oz package of protein powder every day, it indicates that his demand for protein powder is a necessity and not affected by changes in price. This means his price elasticity of demand is perfectly inelastic, or zero.

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

Which of the following statements about price elasticity of demand is false?

Figure 6-1 -Refer to Figure 6-1.A perfectly elastic demand curve is shown in

Suppose the value of the price elasticity of demand is -3.What does this mean?

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

Figure 6-4 -Refer to Figure 6-4.Which of the following statements about price elasticity of demand is true?

Figure 6-3 -Refer to Figure 6-3.Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

If demand is inelastic, the absolute value of the price elasticity of demand is

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase, quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?

Perfectly inelastic demand is represented by a demand curve which is , and relatively inelastic demand is represented by a demand curve which is .

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20, the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Price elasticity of demand measures

Figure 6-1 -Refer to Figure 6-1.The demand curve on which elasticity changes at every point is given in

Figure 6-1 -Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Figure 6-2 -Refer to Figure 6-2.The absolute value of the price elasticity of demand at points a and b is 1.What is the value of Pb?

Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to "feed his muscles" every day.On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?