Question 1

The reason that someone buys a lot more paintings when the price of art falls is that
A) there are many substitutes for paintings.
B) paintings are a necessity.
C) they complement his or her home décor.
D) his or her income has risen.
E) art is a luxury.

Accepted Answer

A

Question 2

Zumba classes sell 20 participant spots at a price of $4.50 each.When the instructor raised the prices to $5.50,10 people attended the class.From the midpoint method,the price elasticity of demand for Zumba is
A)-0.50.
B) -3.33.
C) -2.50.
D) 0.20.
E) -0.20.

Accepted Answer

The price elasticity of demand (PED) is calculated using the midpoint method as follows: PED = [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. Substituting the given values: PED = [(10 - 20) / ((10 + 20) / 2)] / [($5.50 - $4.50) / (($5.50 + $4.50) / 2)] = (-10 / 15) / (1 / 5) = -2/3 / 1/5 = -10/3 = -3.33.

Question 3

When the price increases by 30 percent and the quantity demanded drops by 30 percent,the price elasticity of demand is
A) perfectly inelastic
B) inelastic
C) unitary elastic
D) elastic.
E) perfectly inelastic.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, both changes are 30%, making the elasticity 1, which indicates unitary elasticity.

Question 4

What does the price elasticity of demand measure?
A) what direction the demand curve shifts when the income changes
B) what direction the demand curve shifts when the price changes
C) how much the demand curve shifts when the price changes
D) a producer's sensitivity to a price change
E) a consumer's sensitivity to a price change

Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price, indicating a consumer's sensitivity to a price change.

Question 5

Salima is a devoted Coca-Cola consumer,whereas Antonia can drink either Coca-Cola or Pepsi products.Salima's demand for Coca-Cola will be relatively more ________,while Antonia's demand will be relatively more ________.
A) elastic; inelastic
B) unrelated to price; elastic
C) perfectly elastic; elastic
D) inelastic; elastic
E) unitary elastic; inelastic

Accepted Answer

Salima's demand for Coca-Cola is more inelastic because she is a devoted consumer, meaning she has a strong preference for Coca-Cola and is less likely to switch to another product even if the price increases. On the other hand, Antonia's demand is more elastic because she is willing to drink either Coca-Cola or Pepsi products, and therefore, a small change in price may cause her to switch to the other brand.

Question 6

At a price of $2,the quantity demanded for pens is 12.When the price increases to $3,the quantity demanded for pens is 10.The price elasticity of demand for pens is
A) perfectly inelastic.
B) inelastic.
C) horizontal.
D) elastic.
E) perfectly elastic.

Accepted Answer

The price elasticity of demand (PED) measures how much the quantity demanded of a good responds to a change in the price of that good. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the quantity demanded decreases from 12 to 10 (a decrease of 2/12 = 1/6 or approximately 16.67%) when the price increases from $2 to $3 (an increase of 1/2 = 50%). The PED is therefore 16.67% / 50% = 0.3333, which is less than 1, indicating that the demand is inelastic (i.e., the quantity demanded is relatively unresponsive to price changes).

Question 7

Nicolette raised her quantity demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per puck.Using the midpoint method,her price elasticity of demand is
A) 0.80.
B)-1.25.
C) -1.00.
D) 0.40.
E) -0.80.

Accepted Answer

The answer of Nicolette raised her quantity demanded of hockey...

Question 8

Celine runs a sporting goods store and knows that the price elasticity of demand for her sports clothing line is -1.5.She is planning to lower prices by 10 percent.The percentage change in quantity demanded will be
A) 15 percent.
B) 0.15 percent.
C) 6.66 percent.
D) 0.06 percent.
E) 8.50 percent.

Accepted Answer

The price elasticity of demand formula is % Change in Quantity Demanded / % Change in Price. Given an elasticity of -1.5 and a price reduction of 10%, the calculation is -1.5 * (-10%) = 15%.

Question 9

Price elasticity of demand is measured as the
A) change in quantity demanded divided by the change in price.
B) change in price divided by the change in quantity demanded.
C) percentage change in price divided by the percentage change in quantity demanded.
D) percentage change in demand divided by the percentage change in income.
E) percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price, which accurately reflects how sensitive the quantity demanded of a good is to a change in its price.

Question 10

If a friend says,"I am never going to buy another Avicii remix again!" his or her price elasticity of demand for Avicii remixes is
A) perfectly elastic.
B) perfectly inelastic.
C) elastic.
D) inelastic.
E) unitary elastic.

Accepted Answer

The statement indicates that the friend will not buy any Avicii remixes regardless of any price change, suggesting a perfectly inelastic demand where quantity demanded does not change with price.

Question 11

Suppose that when the price of cereal rises 10 percent,the quantity demanded of cereal falls by 5 percent.Based on this information,what is the approximate price elasticity of demand for cereal?
A) 0.5
B)-0.5
C) 2.0
D)-2.0
E) 0

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 (-5%/10%) = -0.5, indicating that the demand for cereal is inelastic and decreases as the price increases.

Question 12

Price elasticity of demand measures the change in
A) quantity demanded due to the change in price.
B) demand due to the change in price.
C) quantity demanded due to the change in price of another good or service.
D) price due to a change in quantity demanded.
E) price due to the change in demand.

Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It calculates the percentage change in quantity demanded due to a percentage change in price. Thus, it measures the change in quantity demanded due to the change in price.

Question 13

In the accompanying table,assume that the price of ice skates increases from $10 to $20 per pair.Using the midpoint method,what is the price elasticity of demand for ice skates for hockey players?

A) -6.00
B) 0.67
C) 0.11
D) -0.16
E) 3.00

Accepted Answer

The answer of In the accompanying table,assume that the price...

Question 14

Assume that a family spends 35 percent of its income on housing,20 percent on travel-related expenses,10 percent on utilities,25 percent on health care,and 5 percent on miscellaneous items.Demand for which category will be most responsive to a change in price?
A) miscellaneous
B) health care
C) utilities
D) travel-related expenses
E) housing

Accepted Answer

The answer of Assume that a family spends 35 percent...

Question 15

From the accompanying table,we would expect that,for recreational skaters,the price elasticity of demand for ice skates between $10 and $20 to be ________ than that of hockey players because ________.

A) more elastic; ice skates are a normal good
B) less elastic; ice skates are an inferior good
C) the same; they both skate
D) more elastic; recreational skaters can substitute other activities
E) less elastic; hockey players need skates

Accepted Answer

Recreational skaters are not as dependent on ice skating as hockey players are, and thus have more flexibility to substitute other activities. Therefore, we can expect the price elasticity of demand to be more elastic for recreational skaters than for hockey players.

Question 16

Lewis has a fixed budget and buys all of the items listed below.When will a 20 percent reduction in price cause him to change the amount he buys the most?
A) scented candles,regular price is $25
B) jasmine rice,regular price is $4/lb
C) GAP jeans,regular price is $75
D) flat-screen LCD TV,regular price is $400
E) living room couch,regular price is $300

Accepted Answer

Out of all the items listed, the flat-screen LCD TV is the most expensive item. A 20 percent reduction in its price would result in a savings of $80. This may make a significant difference in Lewis' budget and could lead him to purchase this item instead of other less expensive items on the list. Therefore, a 20 percent reduction in price for the flat-screen LCD TV may cause Lewis to change the amount he buys the most.

Question 17

Which of the following would NOT affect a good's price elasticity of demand?
A) whether the good is a necessity
B) the proportion of the budget devoted to the good
C) the number of substitute goods
D) the ease of substituting between the goods
E) the cost of producing the good

Accepted Answer

The cost of producing the good does not directly affect the price elasticity of demand. Price elasticity of demand depends on factors such as availability of substitutes, the proportion of income that people spend on the good in question, and whether the good is a necessity or a luxury.

Question 18

At a price of $5/hour,Karina wants to hire three workers.When the price rises to $7/hour,she wants to hire only two workers.Karina's price elasticity of demand for workers is
A) -0.83.
B)-1.20.
C) -0.33.
D) -0.40.
E) -0.10.

Accepted Answer

Price elasticity of demand for labor is given by the formula

% change in quantity demanded of labor / % change in wages

% change in quantity demanded of labor = ((2-3)/2.5) * 100% = -40%

% change in wages = ((7-5)/6) * 100% = 33.33%

Therefore,

Price elasticity of demand for workers = (-40%/33.33%) = -1.20

Since the result is negative, the demand for workers is elastic, which means that a small increase in wages leads to a large decrease in the quantity of labor demanded.

Question 19

When the price of scooters drops by 5 percent,the quantity demanded changes by 20 percent.We know that the price elasticity of demand for scooters is
A) perfectly inelastic.
B) inelastic.
C) unitary elastic.
D) elastic.
E) perfectly elastic.

Accepted Answer

The fact that a 5% decrease in price results in a 20% increase in quantity demanded indicates that the demand for scooters is sensitive to changes in price, meaning it is elastic.

Question 20

If the elasticity of demand for Good A is -3,a 33 percent decrease in quantity demanded of Good A results from a(n)________ in the price of Good A.
A) 99 percent decrease
B) 99 percent increase
C) 11 percent decrease
D) 11 percent increase
E) 33 percent decrease

Accepted Answer

According to the formula for elasticity of demand, a 1 percent increase in price will lead to a 0.33 percent decrease in quantity demanded. Therefore, a 11 percent increase in price will result in a 33 percent decrease in quantity demanded (11 x 0.33 = 3.63, which rounds to 3.6 or 3.7 percent, and 3.7/0.33 = 11.2, which rounds to 11 percent). Therefore, choice D is the correct answer.

Quiz 4: Elasticity

The reason that someone buys a lot more paintings when the price of art falls is that

Zumba classes sell 20 participant spots at a price of $4.50 each.When the instructor raised the prices to $5.50,10 people attended the class.From the midpoint method,the price elasticity of demand for Zumba is

When the price increases by 30 percent and the quantity demanded drops by 30 percent,the price elasticity of demand is

What does the price elasticity of demand measure?

Salima is a devoted Coca-Cola consumer,whereas Antonia can drink either Coca-Cola or Pepsi products.Salima's demand for Coca-Cola will be relatively more ,while Antonia's demand will be relatively more .

At a price of $2,the quantity demanded for pens is 12.When the price increases to $3,the quantity demanded for pens is 10.The price elasticity of demand for pens is

Nicolette raised her quantity demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per puck.Using the midpoint method,her price elasticity of demand is

Celine runs a sporting goods store and knows that the price elasticity of demand for her sports clothing line is -1.5.She is planning to lower prices by 10 percent.The percentage change in quantity demanded will be

Price elasticity of demand is measured as the

If a friend says,"I am never going to buy another Avicii remix again!" his or her price elasticity of demand for Avicii remixes is

Suppose that when the price of cereal rises 10 percent,the quantity demanded of cereal falls by 5 percent.Based on this information,what is the approximate price elasticity of demand for cereal?

Price elasticity of demand measures the change in

In the accompanying table,assume that the price of ice skates increases from $10 to $20 per pair.Using the midpoint method,what is the price elasticity of demand for ice skates for hockey players?

Assume that a family spends 35 percent of its income on housing,20 percent on travel-related expenses,10 percent on utilities,25 percent on health care,and 5 percent on miscellaneous items.Demand for which category will be most responsive to a change in price?

From the accompanying table,we would expect that,for recreational skaters,the price elasticity of demand for ice skates between $10 and $20 to be than that of hockey players because .

Lewis has a fixed budget and buys all of the items listed below.When will a 20 percent reduction in price cause him to change the amount he buys the most?

Which of the following would NOT affect a good's price elasticity of demand?

At a price of $5/hour,Karina wants to hire three workers.When the price rises to $7/hour,she wants to hire only two workers.Karina's price elasticity of demand for workers is

When the price of scooters drops by 5 percent,the quantity demanded changes by 20 percent.We know that the price elasticity of demand for scooters is

If the elasticity of demand for Good A is -3,a 33 percent decrease in quantity demanded of Good A results from a(n) ________ in the price of Good A.