Question 1

The price elasticity of demand measures
A) changes in demand.
B) how responsive producers are to a change in demand.
C) how responsive consumers are to a change in price.
D) how responsive consumers are to a change in income.

Accepted Answer

Price elasticity of demand measures how consumers react to the change in price of a good or service. It measures the responsiveness of the quantity demanded to a change in price. Thus, option C is the correct choice. Option A refers to changes in demand while option B refers to how producers react to changes in demand. Option D is about how responsive consumers are to a change in income, which is measured by income elasticity of demand.

Question 2

When discussing the price elasticity of demand we generally refer to the absolute price elasticity of demand by consumers. This means that we will
A) disregard the law of demand.
B) ignore its relationship to demand.
C) disregard the minus sign.
D) consider absolute rather than relative changes.

Accepted Answer

When we refer to the absolute price elasticity of demand, we disregard the minus sign, which indicates the direction of the change in price and demand. Instead, we focus on the absolute value of the elasticity measure, which indicates the degree of responsiveness of demand to a given change in price, regardless of the direction. This allows us to compare the responsiveness of demand across different products and markets, without being biased towards price increases or decreases.

Question 3

If the price of a cola increased by 12 % and consumers responded by purchasing 20 % less cola, the absolute value of price elasticity of demand for cola would be
A) 0.20.
B) 0.80.
C) 1.67.
D) 1.80.

Accepted Answer

The formula for price elasticity of demand is percentage change in quantity demanded divided by percentage change in price. In this scenario, the price increased by 12% and quantity demanded decreased by 20%, so the percentage change in quantity demanded is -20%/100% = -0.2 and the percentage change in price is 12%/100% = 0.12.

Using the formula, we get:
Price elasticity of demand = |-0.2/0.12| = 1.67

Therefore, the best choice is C) 1.67

Question 4

If the absolute price elasticity of demand for a product is greater than 1, then
A) consumers are relatively insensitive to price changes.
B) consumers are relatively sensitive to price changes.
C) there is a positive relationship between price changes and total revenue.
D) producers are relatively insensitive to price changes.

Accepted Answer

If the absolute price elasticity of demand for a product is greater than 1, it means that a small change in the price of the product leads to a relatively larger change in the quantity demanded. This indicates that consumers are relatively sensitive to price changes and are likely to respond by reducing their demand for the product. Therefore, the best choice is B.

Question 5

Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is
A) 0.69.
B) 1.45.
C) 1.00.
D) infinity.

Accepted Answer

The answer of Owners of a coffee shop finds that...

Question 6

"The slope of the demand curve gives the elasticity of demand." Do you agree or disagree? Why?

Accepted Answer

The answer of "The slope of the demand curve gives...

Question 7

The greater is the absolute price elasticity of demand, the
A) larger is the responsiveness of quantity demanded to the price change.
B) smaller is the responsiveness to a price change.
C) larger is the income of the buyer.
D) higher is the change in demand to an income change.

Accepted Answer

Absolute price elasticity of demand refers to how much the quantity demanded changes in response to a change in price. A larger absolute price elasticity of demand means the quantity demanded is more responsive to price changes, indicating greater sensitivity to changes in price levels. In other words, a slight change in price will result in a significant change in the quantity demanded.

Question 8

If the price of corn chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range is
A) 0.50.
B) 1.67.
C) 0.93.
D) 2.33.

Accepted Answer

Price elasticity of demand = absolute value of % change in quantity demanded / % change in price

% change in quantity demanded = ((50 million - 100 million) / ((50 million + 100 million) / 2)) x 100% = -50%

% change in price = ((3.00 - 2.00) / ((3.00 + 2.00) / 2)) x 100% = 50%

Price elasticity of demand = |-50% / 50%| = 1.67

Therefore, the absolute value of price elasticity of demand in that price range is 1.67.

Question 9

What is the price elasticity of demand? How is the price elasticity of demand calculated?

Accepted Answer

The answer of What is the price elasticity of demand?...

Question 10

Consider the following data: Price of A Quantity Demanded of A
$5 6
$4 10
The absolute value of the price elasticity of demand for product A is
A) 0.44.
B) 1.80.
C) 0.56.
D) 2.25.

Accepted Answer

The answer of Consider the following data: Price of A...

Question 11

The price elasticity of demand is
A) always negative.
B) sometimes positive.
C) always positive.
D) constant along the demand curve.

Accepted Answer

The price elasticity of demand is typically negative because it reflects the inverse relationship between price and quantity demanded, as described by the law of demand.

Question 12

If the price of oil goes up by 50 % and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is
A) 0.25.
B) 0.50.
C) 0.75.
D) 1.00.

Accepted Answer

The formula for price elasticity of demand is (% change in quantity demanded / % change in price). In this case, the price of oil has increased by 50% and the quantity demanded has decreased by 25%. So, using the formula:
Price elasticity of demand = (% change in quantity demanded / % change in price)
= (-25% / 50%)
= -0.5
Taking the absolute value, we get 0.5, which corresponds to answer choice B.

Question 13

If the absolute value of the price elasticity of demand for a product is 1.5, and the price of a product increased 30 percent, then the quantity demanded will decline by
A) 45 percent.
B) 20 percent.
C) 5 percent.
D) 10 percent.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. If the elasticity is 1.5 and the price increases by 30%, the quantity demanded will decrease by 1.5 * 30% = 45%.

Question 14

If the absolute price elasticity of demand for a product is less than 1, then
A) consumers are relatively insensitive to price changes.
B) consumers are relatively sensitive to price changes.
C) there is a positive relationship between price changes and total revenue.
D) producers are relatively insensitive to price changes.

Accepted Answer

If the absolute price elasticity of demand for a product is less than 1, it indicates that consumers are relatively insensitive to price changes, which means that changes in price result in proportionally smaller changes in quantity demanded. In this case, a decrease in price will lead to a relatively smaller increase in demand, while an increase in price will lead to a relatively smaller decrease in demand. Thus, producers can raise the price without losing a significant number of customers, leading to an increase in total revenue.

Question 15

If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week, the absolute value of price elasticity of demand in that price range is approximately
A) 0.23.
B) 4.35.
C) 0.93.
D) 2.34.

Accepted Answer

The answer of If the price of gasoline increases from...

Question 16

If the absolute price elasticity of demand is 0.2, a 10 percent increase in the price will cause
A) the quantity demanded to decrease by 2 percent.
B) the quantity demanded to decrease by 20 percent.
C) the quantity demanded to decrease by 5 percent.
D) the quantity demanded to decrease by 0.2 percent.

Accepted Answer

The absolute price elasticity of demand is 0.2, meaning a 1% increase in price leads to a 0.2% decrease in quantity demanded. Therefore, a 10% increase in price results in a 2% decrease in quantity demanded (10% * 0.2 = 2%).

Question 17

Price elasticity of demand is measured using percentage changes. Why?

Accepted Answer

The answer of Price elasticity of demand is measured using...

Question 18

At a price of $10, quantity demanded is 30 units. When the price rises to $11, quantity demanded is 24 units. What is the absolute price elasticity of demand?
A) 0.5
B) 0.43
C) 2.33
D) 6.0

Accepted Answer

The answer of At a price of $10, quantity demanded...

Question 19

"Price elasticity measures how many more units of a good that consumers will buy given a decrease in price." Do you agree or disagree? Explain.

Accepted Answer

The answer of "Price elasticity measures how many more units...

Question 20

If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause
A) the quantity demanded to decrease by 2 percent.
B) the quantity demanded to decrease by 20 percent.
C) the quantity demanded to decrease by 5 percent.
D) the quantity demanded to decrease by 0.2 percent.

Accepted Answer

A price elasticity of demand of 2 indicates that a 10% increase in price will cause a 20% decrease in quantity demanded (elastic demand). Therefore, choice B is the correct answer.

Quiz 19: Demand and Supply Elasticity

The price elasticity of demand measures

When discussing the price elasticity of demand we generally refer to the absolute price elasticity of demand by consumers. This means that we will

If the price of a cola increased by 12 % and consumers responded by purchasing 20 % less cola, the absolute value of price elasticity of demand for cola would be

If the absolute price elasticity of demand for a product is greater than 1, then

Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is

"The slope of the demand curve gives the elasticity of demand." Do you agree or disagree? Why?

The greater is the absolute price elasticity of demand, the

If the price of corn chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range is

What is the price elasticity of demand? How is the price elasticity of demand calculated?

Consider the following data: Price of A Quantity Demanded of A $5 6 $4 10 The absolute value of the price elasticity of demand for product A is

The price elasticity of demand is

If the price of oil goes up by 50 % and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is

If the absolute value of the price elasticity of demand for a product is 1.5, and the price of a product increased 30 percent, then the quantity demanded will decline by

If the absolute price elasticity of demand for a product is less than 1, then

If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week, the absolute value of price elasticity of demand in that price range is approximately

If the absolute price elasticity of demand is 0.2, a 10 percent increase in the price will cause

Price elasticity of demand is measured using percentage changes. Why?

At a price of $10, quantity demanded is 30 units. When the price rises to $11, quantity demanded is 24 units. What is the absolute price elasticity of demand?

"Price elasticity measures how many more units of a good that consumers will buy given a decrease in price." Do you agree or disagree? Explain.

If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause