Question 1

If total expenditure on a product rises and falls directly with a product's price,then demand for this product has an elasticity of

Accepted Answer

The answer of If total expenditure on a product rises...

Question 2

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

Accepted Answer

If the total expenditure decreases when the price falls, it indicates that the percentage decrease in price is greater than the percentage increase in quantity demanded, implying inelastic demand (elasticity less than one).

Question 3

FIGURE 4-2
-Refer to Figure 4-2.As price decreases,total expenditure remains constant in diagram(s)

Accepted Answer

In diagram 3, the demand curve is unit elastic, meaning that the percentage change in quantity demanded is equal to the percentage change in price, resulting in constant total expenditure.

Question 4

Suppose the price of take-out pizza has been stable for many months at exactly $12.50 per pizza - and Olivier buys 6 pizzas per month at this price.When the price rises to $12.55 per pizza,Olivier's quantity demanded drops to zero.Apparently,Olivier's price elasticity of demand for take-out pizza is

Accepted Answer

If the price increase from $12.50 to $12.55 led to a drop in Olivier's quantity demanded from 6 pizzas to 0, then the percentage change in price is:
((12.55 - 12.50) / 12.50) x 100% = 0.4%

Using the midpoint formula to calculate the percentage change in quantity demanded:
((Q2 - Q1) / ((Q1 + Q2)/2)) x 100% = ((0-6) / ((0+6)/2)) x 100% = -100%

Then, the price elasticity of demand for Olivier can be calculated as:
% change in quantity demanded / % change in price = (-100%)/(0.4%) = -250

Since this value is greater than 10,000 (i.e. it is very large), we can conclude that Olivier's price elasticity of demand is higher than 10,000, which means that he is very sensitive to changes in the price of pizza.

Question 5

Every month Olivier buys exactly 6 take-out pizzas even though the price may fluctuate significantly.Apparently,Olivier's price elasticity of demand for take-out pizza is

Accepted Answer

Since Olivier is always buying the same quantity of pizzas regardless of the price fluctuations, his demand is completely inelastic. Elasticity of demand is measured as the percentage change in quantity demanded in response to a percentage change in price. If the percentage change in quantity demanded is lower than the percentage change in price, the demand is considered inelastic (and the elasticity value approaches 0). Therefore, choice B, 0, is the best answer.

Question 6

Elasticity of demand for prescription drugs is estimated to be much lower than elasticity of demand for one particular brand of over-the-counter cough medicine.One reason for this is

Accepted Answer

Prescription drugs cover a broad category of medicines and often have fewer substitutes, while over-the-counter cough medicine may have many substitutes. Hence, the elasticity of demand for prescription drugs is estimated to be much lower than the elasticity of demand for one particular brand of over-the-counter cough medicine due to the availability of substitutes for the latter.

Question 7

The president of a major nickel-producing company says that an increase in the price of nickel would have no effect on the total amount spent on nickel.If this is true,the price elasticity of demand for nickel is

Accepted Answer

If the total amount spent on nickel remains unchanged when the price changes, the price elasticity of demand is exactly one, indicating unitary elasticity.

Question 8

If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is

Accepted Answer

When the total expenditure on cars increases as the price of cars rises, it means that the percentage change in quantity demanded is less than the percentage change in price. This indicates that the demand for cars is inelastic, with a price elasticity of demand that is less than one.

Question 9

Suppose the current level of output of some good is 100 units.If market demand is inelastic at that quantity,total expenditure on this product would be higher if output was

Accepted Answer

When demand is inelastic, a decrease in quantity leads to a proportionally larger increase in price, thus increasing total expenditure.

Question 10

If price elasticity of demand for good X is equal to 0.4,then an increase in price will cause total expenditure on good X to

Accepted Answer

When the price elasticity of demand is less than 1 (inelastic), an increase in price leads to an increase in total expenditure.

Question 11

Suppose Statistics Canada reports that total income earned by Canadian barley farmers has declined as a result of a partial crop failure that has driven up the Canadian price of barley.We can conclude that the price elasticity of demand for barley in Canada is

Accepted Answer

The answer of Suppose Statistics Canada reports that total income...

Question 12

FIGURE 4-2
-Refer to Figure 4-2.As price decreases,total expenditure increases,reaches a maximum,and then decreases for the demand curve in diagram(s)

Accepted Answer

The answer of  FIGURE 4-2
-Refer to Figure 4-2.As price...

Question 13

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?

Accepted Answer

The formula for price elasticity of demand is: 
% change in quantity demanded / % change in price

We know that a 10% increase in tuition fees will result in a 3% decline in enrolment, which means:
% change in quantity demanded = -3%
% change in price = 10%

Plugging these values into the formula for price elasticity of demand, we get:
-3% / 10% = -0.3

The negative sign just indicates an inverse relationship between price and quantity demanded (as price increases, quantity demanded decreases). Therefore, the implied price elasticity of demand is 0.3.

Question 14

Rania is selling boxes of cookies door to door in her neighbourhood.At a price of $10 per box she sold 40 boxes per day.When the price was reduced to $4 per box she sold 100 boxes per day.Assuming that the demand conditions were unchanged,what is the price elasticity of demand for Rania's cookies?

Accepted Answer

The answer of Rania is selling boxes of cookies door...

Question 15

Which of the following situations could explain why product X has a relatively high price elasticity of demand in the short run?

Accepted Answer

If there are many substitutes for product X and consumers have an ability to switch quickly to those substitutes, then the price elasticity of demand for product X will be relatively high in the short run. This means that a small change in the price of product X will cause a proportionally larger change in the quantity demanded.

Question 16

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.Given the information this provides about price elasticity of demand,what is the predicted effect on total expenditure on tuition fees?

Accepted Answer

The price elasticity of demand is inelastic (less than 1) since a 10% increase in price leads to only a 3% decrease in quantity demanded. Therefore, total expenditure on tuition fees will increase.

Question 17

When a product's price has an inverse relationship with total expenditure,then demand has a price elasticity of

Accepted Answer

When demand has an inverse relationship with total expenditure, it means that as the price of the product decreases, the total amount spent on the product increases. This indicates that the product has an elastic demand, with a price elasticity of greater than one.

Question 18

If the total expenditure on photocopiers increases when the price of photocopiers rises,the price elasticity of demand is

Accepted Answer

If the total expenditure on photocopiers increases when the price of photocopiers rises, it means that the demand for photocopiers is not very sensitive to price changes (inelastic demand). Therefore, the price elasticity of demand is less than one.

Question 19

A demand curve for which any price-quantity combination yields the same total expenditure reveals a price elasticity of demand equal to

Accepted Answer

If any price-quantity combination yields the same total expenditure, it implies that the demand curve is a rectangular hyperbola with a constant slope of -1. This type of demand curve has a price elasticity of demand that is equal to one.

Question 20

If the total expenditure on perfume increases when the price of perfume falls,the price elasticity of demand is

Accepted Answer

When the total expenditure on a product increases as the price of that product falls, then demand is said to be elastic. This is because consumers are more responsive to the price change and therefore buy more of the product, leading to a larger increase in quantity demanded than the decrease in price. Price elasticity of demand is greater than one in this case.

Quiz 4: Elasticity