Question 1

-Refer to Figure 4-4. The inelastic segment of the demand curve
A) is coincident with the horizontal axis.
B) is coincident with the vertical axis.
C) lies below the midpoint of the curve.
D) lies above the midpoint of the curve.

Accepted Answer

The inelastic segment of the demand curve lies below the midpoint of the curve. This is because inelastic demand refers to a situation where there is a relatively small change in quantity demanded in response to a change in price, indicating a relatively high level of consumer loyalty to the product. Therefore, the quantity demanded will change less in response to price changes, resulting in a segment of the curve that is relatively steep and located below the midpoint of the curve.

Question 2

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

C

Question 3

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?
A) It is inelastic at high prices and elastic at low prices.
B) It is unit-elastic throughout the demand curve.
C) It is elastic at high prices and inelastic at low prices.
D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Accepted Answer

Along a linear demand curve, the elasticity of demand varies at different price points. At high prices, demand is relatively inelastic as consumers are willing to buy the good even if the price increases. At low prices, demand is relatively elastic as consumers are more price-sensitive and a small change in price can lead to a large change in quantity demanded. Therefore, the correct statement is that the price elasticity of demand is elastic at high prices and relatively inelastic at low prices. Choice B is incorrect because unit elasticity only occurs at the midpoint of the demand curve. Choice A and D are incorrect because they generalize the elasticity across the entire demand curve, ignoring the fact that it varies at different price points.

Question 4

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 5

-Refer to Figure 4-1. A perfectly elastic demand curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Accepted Answer

A perfectly elastic demand curve is represented by a horizontal line, indicating that consumers are willing to purchase any quantity of the good at a specific price but none at a price even slightly higher. Panel B shows this horizontal line.

Question 6

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 responsive quantity demanded is to a change in price.

Question 7

-Refer to Figure 4-3. 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

The answer of 
-Refer to Figure 4-3. Using the midpoint...

Question 8

-Refer to Figure 4-1. 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 
-Refer to Figure 4-1. The demand curve...

Question 9

A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand.
A) downward sloping; vertical
B) horizontal; downward sloping
C) vertical; downward sloping
D) upward sloping; horizontal

Accepted Answer

A vertical demand curve represents perfectly inelastic demand because the quantity demanded remains the same regardless of the change in price. A downward sloping demand curve represents inelastic demand because the percentage change in quantity demanded is less than the percentage change in price.

Question 10

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

If demand is perfectly inelastic, it means that consumers are not responsive to changes in the price of the good. In other words, the quantity demanded remains the same no matter how much the price changes. This results in a vertical demand curve, and the price elasticity of demand is zero.

Question 11

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 0.

Accepted Answer

Seth's statement suggests that he is a dedicated body builder who is committed to consuming the 12-oz protein powder package every day. This indicates that his demand for protein powder is not affected by its price, making it perfectly inelastic. Regardless of the price of the supplement, Seth will continue to purchase and consume it every day to meet his dietary requirements.

Question 12

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, it means that a change in price has a relatively smaller effect on the quantity demanded. This is reflected in a price elasticity of demand that is less than one.

Question 13

Suppose the value of the price elasticity of demand is -3. What does this mean?
A) A 1 per cent increase in the price of the good causes quantity demanded to increase by 3 per cent.
B) A 1 per cent increase in the price of the good causes quantity demanded to decrease by 3 per cent.
C) A 3 per cent increase in the price of the good causes quantity demanded to decrease by 1 per cent.
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% increase in price will lead to a 3% decrease in quantity demanded. The negative sign indicates that the relationship between price and quantity demanded is inverse, meaning they move in opposite directions.

Question 14

-Refer to Figure 4-4. At the midpoint of the demand curve, in absolute value
A) the price elasticity coefficient is at a maximum.
B) the price elasticity coefficient is at a minimum.
C) the price elasticity coefficient is zero.
D) the price elasticity coefficient is one.

Accepted Answer

At the midpoint of the demand curve, the price elasticity coefficient is equal to one, which means that a one percent change in price leads to a one percent change in quantity demanded. This is sometimes referred to as unit elasticity.

Question 15

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

The answer of Which of the following statements about price...

Question 16

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

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

Using the midpoint formula:
- For the first scenario (50 units sold at $20), midpoint of quantity = (50+0)/2 = 25 and midpoint of price = ($20+$0)/2 = $10. So, percentage change in quantity = (50-0)/25 * 100% = 200% and percentage change in price = ($20-$0)/$10 * 100% = 200%. 
- For the second scenario (80 units sold at $15), midpoint of quantity = (80+50)/2 = 65 and midpoint of price = ($15+$20)/2 = $17.50. So, percentage change in quantity = (80-50)/65 * 100% = 44.6% and percentage change in price = ($15-$20)/$17.50 * 100% = -28.6%.

Using the formula for price elasticity of demand, we get:

Price elasticity of demand = (|44.6%| / 200%) / (|-28.6%| / 200%) = 1.62

Since we need to find the absolute value of the price elasticity of demand, the answer is C.

Question 17

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 per cent. What was the percentage change in price that brought about this change in quantity demanded?
A) 40 per cent
B) 25 per cent
C) 2.5 per cent
D) 0.4 per cent

Accepted Answer

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

Question 18

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

Accepted Answer

A price increase of 15% with a price elasticity of -3 means that quantity demanded will decrease by 15% multiplied by -3, or 45%. Therefore, the correct answer is C, which states that quantity demanded will decrease by 45%.

Question 19

-Refer to Figure 4-4. Which of the following statements is true about the price elasticity of demand?
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 in this segment, a small change in price causes a relatively large change in quantity demanded, indicating high price elasticity. In contrast, the inelastic portion of the demand curve corresponds to the segment below the midpoint, where a change in price causes a proportionally smaller change in quantity demanded, indicating low price elasticity. The elasticity coefficient is not constant along the demand curve, and it is not zero at the midpoint.

Question 20

-Refer to Figure 4-1. 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 vertical, indicating that quantity demanded does not change with price changes. Panel A typically represents this scenario.

Quiz 4: Elasticity: The Responsiveness of Demand and Supply

-Refer to Figure 4-4. The inelastic segment of the demand curve

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.

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?

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?

-Refer to Figure 4-1. A perfectly elastic demand curve is shown in

Price elasticity of demand measures

-Refer to Figure 4-3. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

-Refer to Figure 4-1. The demand curve on which elasticity changes at every point is given in

A demand curve which is represents perfectly inelastic demand, and a demand curve which is represents inelastic demand.

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

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?

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

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

-Refer to Figure 4-4. At the midpoint of the demand curve, in absolute value

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

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.

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 per cent. What was the percentage change in price that brought about this change in quantity demanded?

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

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

-Refer to Figure 4-1. A perfectly inelastic demand curve is shown in