Question 1

The calculated price elasticity of demand:
A) is always a negative number, although it is sometimes reported as an absolute value.
B) is sometimes negative and sometimes positive, depending on the magnitude of response.
C) is always a positive number, because price and quantity are directly related in terms of demand.
D) can be positive or negative, but is always reported as an absolute value.

Accepted Answer

The price elasticity of demand is always a negative number, as it measures the percentage change in quantity demanded in response to a percentage change in price. However, it is sometimes reported as an absolute value for ease of interpretation.

Question 2

If supply and demand analysis is a measure of how,then elasticity is a measure of:
A) how much.
B) when.
C) why.
D) how quickly.

Accepted Answer

Elasticity measures how much the quantity demanded or supplied changes in response to a change in price or income.

Question 3

Price elasticity is a measure of how
A) much a market responds to a change in market conditions.
B) much consumers or producers respond to a change in market price.
C) quickly consumers or producers respond to a change in market price.
D) quickly a market will respond to a change in market conditions.

Accepted Answer

Price elasticity measures the responsiveness of consumers or producers to a change in market price. It tells us how much consumers or producers will adjust their demand or supply quantity in response to a change in price.

Question 4

If a large percentage change in price leads to a smaller percentage change in quantity demanded,the result is a:
A) very elastic demand.
B) less elastic demand.
C) low magnitude of response.
D) high magnitude of response.

Accepted Answer

If a large percentage change in price leads to a smaller percentage change in quantity demanded, it indicates a less elastic demand. In this scenario, the change in price had a relatively smaller impact on the quantity demanded. A very elastic demand would see a large change in quantity demanded in response to even a small change in price. The terms "low magnitude of response" and "high magnitude of response" are not commonly used in economics, and do not provide useful information to answer this question.

Question 5

Elasticities are used to measure responses to a change in:
A) the price of a good.
B) the price of a related good.
C) income.
D) All of these are true.

Accepted Answer

Elasticities can measure responses to changes in price, the price of related goods, and income. Therefore, all choices are true.

Question 6

The price elasticity of demand for eggs is 0.27.Thus,0.27 is the:
A) percentage change in the quantity demanded of eggs when the price of eggs increases by one percent.
B) size of the shift in the demand for eggs when the price of eggs changes by one percent.
C) size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price change.
D) percentage change in the price of eggs when the quantity demanded of eggs increases by one percent.

Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. A value of 0.27 means that for every 1% increase in the price of eggs, the quantity demanded will decrease by 0.27%. Therefore, option A is the correct answer.

Question 7

Suppose a decrease in price increases quantity demanded from 8 to 12.Using the mid-point formula,the percentage change in quantity demanded is:
A) 0.1, and is elastic.
B) 40 = 400 percent.
C) 0.40 = 40 percent.
D) 0.40 = 40 percent

Accepted Answer

The mid-point formula for percentage change in quantity demanded is [(Q2 - Q1) / ((Q2 + Q1) / 2)] * 100. Substituting the values: [(12 - 8) / ((12 + 8) / 2)] * 100 = 40%.

Question 8

The mid-point method of calculating price elasticity of demand:
A) measures the percentage changes relative to a point midway between two points on a demand curve.
B) measures the absolute change relative to a point midway between two points on a demand curve.
C) measures the percentage change relative to a point midway between demand and supply.
D) None of these is true.

Accepted Answer

The mid-point method of calculating price elasticity of demand measures the percentage changes in quantity demanded relative to a point midway between two points on a demand curve, as opposed to using the absolute change between two points. This method provides a more accurate and unbiased estimate of price elasticity, especially when there are large changes in price and quantity demanded.

Question 9

The mid-point method of calculating elasticity is typically used because:
A) it is easier to calculate.
B) it is universally understood by all economists.
C) the negative sign can then be ignored.
D) it is a consistent way to estimate the elasticity of demand between two points on a demand curve, regardless of the direction of the movement.

Accepted Answer

The mid-point method is a consistent way to estimate elasticity between two points on a demand curve, regardless of the direction of movement. This makes it a preferred method for economists to use. The method has the added advantage that it produces the same result regardless of which one of the two points is taken as the starting point. Additionally, it overcomes the problem of division by zero that is found when calculating elasticity in the traditional way.

Question 10

If a small percentage change in price causes a larger percentage change in the quantity demanded,the good has:
A) an inelastic demand.
B) a low magnitude of response.
C) an elastic demand.
D) a high magnitude of response.

Accepted Answer

This is the definition of elastic demand. When a small change in price leads to a larger change in quantity demanded, it means that consumers are very sensitive to price changes and will adjust their demand accordingly. Inelastic demand, on the other hand, is when a change in price has little effect on the quantity demanded.

Question 11

If consumers' buying decisions are not very sensitive to changes in price,then their demand is:
A) more elastic.
B) less elastic.
C) perfectly inelastic.
D) unit elastic.

Accepted Answer

When consumers' buying decisions are not very sensitive to changes in price, their demand is said to be less elastic. This means that even if the price changes, the quantity demanded remains relatively constant. In contrast, when consumers are highly sensitive to price changes, demand is more elastic, meaning that a change in price will result in a significant change in the quantity demanded. Therefore, option B is the correct answer.

Question 12

Suppose price increases from $7.00 to $13.00.Using the mid-point formula,the percentage change in price is:
A) .0.6 = 60 percent.
B) 0.6 = 60 percent.
C) 70 percent.
D) 130 percent.

Accepted Answer

The mid-point formula is used to calculate the percentage change between two values. The formula is:

Percentage change = ((New value - Old value) / ((New value + Old value) / 2)) x 100

Using the given values:

Percentage change = ((13 - 7) / ((13 + 7) / 2)) x 100
Percentage change = (6 / 10) x 100
Percentage change = 60%

Therefore, the correct answer is B, 0.6 = 60 percent.

Question 13

If a good has an elastic demand,then:
A) a small percentage change in price will cause a larger percentage change in quantity demanded.
B) a small percentage change in price will cause virtually no change in quantity demanded.
C) a large percentage change in price will cause a smaller change in quantity demanded.
D) any percentage change in price will cause an almost immediate response in quantity demanded.

Accepted Answer

In goods with elastic demand, consumers are highly sensitive to changes in price, so a small percentage change in price will cause a larger percentage change in quantity demanded. This means that if the price of the good increases, consumers will significantly reduce their demand for the good, and if the price of the good decreases, consumers will significantly increase their demand for the good.

Question 14

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil,then 0.02 is the
A) price elasticity of demand.
B) price elasticity of supply.
C) cross-price elasticity of demand.
D) income elasticity of demand.

Accepted Answer

The given scenario describes the elasticity of demand, which measures the responsiveness of the quantity demanded to a change in price. The formula for price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. In this case, a 1% change in price causes a 0.02% change in quantity demanded, resulting in a price elasticity of demand of 0.02/1 = 0.02. Therefore, the correct answer is A.

Question 15

The most commonly used measures of elasticity are:
A) income elasticity of demand and price elasticity of supply.
B) price elasticity of demand and price elasticity of supply.
C) cross-price elasticity of demand and cross-price elasticity of supply.
D) price elasticity of demand and cross-price elasticity of supply.

Accepted Answer

The most commonly used measures of elasticity are price elasticity of demand and price elasticity of supply. These two measures help in understanding the changes in demand and supply in response to changes in price. Cross-price elasticity of demand and supply are also important measures, but they are not as widely used as the former two. Income elasticity of demand is another measure that is frequently used but it is not as relevant for understanding the impact of price changes on demand or supply.

Question 16

Suppose an increase in price decreases quantity demanded from 210 to 190.Using the mid-point formula,the percentage change in quantity demanded is:
A) 2 = 200 percent.
B) 0.2 = 20 percent.
C) 0.2 = 20 percent
D) 0.1 = 10 percent

Accepted Answer

The mid-point formula for percentage change in quantity demanded is [(Q2 - Q1) / ((Q2 + Q1) / 2)] * 100. Here, Q1 = 210 and Q2 = 190. So, the percentage change is [(190 - 210) / ((190 + 210) / 2)] * 100 = (-20 / 200) * 100 = -10%.

Question 17

Different measurements of elasticity include:
A) income elasticity of demand, income elasticity of supply.
B) price elasticity of demand, price elasticity of supply.
C) cross-price elasticity of demand, income elasticity of supply.
D) preference elasticity of demand, cross-price elasticity of supply.

Accepted Answer

Price elasticity of demand and price elasticity of supply are the two most common measurements of elasticity. Income elasticity of demand and cross-price elasticity of demand are also frequently used, but income elasticity of supply and preference elasticity of demand are less common.

Question 18

Economists use the percentage change in quantity rather than the absolute change in quantity because:
A) percentage changes are easier to calculate than absolute changes.
B) the measured elasticity is the same regardless of the unit of measurement for quantity.
C) absolute changes are confusing to convert.
D) absolute changes often result in negative numbers.

Accepted Answer

Economists use percentage change in quantity because it allows for comparisons across different products and industries regardless of their differing units of measurements. Moreover, the percentage change is used to calculate price elasticity of demand/supply, which remains constant irrespective of the scale of measurement, unlike absolute change.

Question 19

The concept of price elasticity is applied to changes in:
A) quantity demanded, but not quantity supplied.
B) quantity supplied, but not quantity demanded.
C) both quantities supplied and quantity demanded.
D) neither quantity supplied nor quantity demanded.

Accepted Answer

Price elasticity measures the responsiveness of quantity demanded and/or quantity supplied to changes in price. Therefore, it applies to both quantities supplied and quantity demanded.

Question 20

Mathematically,price elasticity of demand is the percentage change in the:
A) quantity demanded of a good in response to a given percentage change in the price of the good.
B) price of a good that is demanded in response to a given percentage change in quantity.
C) quantity of a good that is supplied in response to a given percentage change in price.
D) price of a good that is supplied in response to a given percentage change in quantity.

Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded of a good to a change in its price. It is calculated as the percentage change in the quantity demanded of a good divided by the percentage change in its price. Therefore, option A is the correct answer.

Quiz 4: Elasticity

The calculated price elasticity of demand:

If supply and demand analysis is a measure of how,then elasticity is a measure of:

Price elasticity is a measure of how

If a large percentage change in price leads to a smaller percentage change in quantity demanded,the result is a:

Elasticities are used to measure responses to a change in:

The price elasticity of demand for eggs is 0.27.Thus,0.27 is the:

Suppose a decrease in price increases quantity demanded from 8 to 12.Using the mid-point formula,the percentage change in quantity demanded is:

The mid-point method of calculating price elasticity of demand:

The mid-point method of calculating elasticity is typically used because:

If a small percentage change in price causes a larger percentage change in the quantity demanded,the good has:

If consumers' buying decisions are not very sensitive to changes in price,then their demand is:

Suppose price increases from $7.00 to $13.00.Using the mid-point formula,the percentage change in price is:

If a good has an elastic demand,then:

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil,then 0.02 is the

The most commonly used measures of elasticity are:

Suppose an increase in price decreases quantity demanded from 210 to 190.Using the mid-point formula,the percentage change in quantity demanded is:

Different measurements of elasticity include:

Economists use the percentage change in quantity rather than the absolute change in quantity because:

The concept of price elasticity is applied to changes in:

Mathematically,price elasticity of demand is the percentage change in the: