Question 1

A linear downward sloping demand curve has price elasticities (in absolute values)that
A)increase as price decreases.
B)remain constant along the demand curve.
C)decrease as price decreases.
D)are greater than or equal to 1.

Accepted Answer

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. For a linear downward-sloping demand curve, the price elasticity of demand varies along the demand curve. At higher prices, the absolute value of price elasticity is lower (inelastic demand) because a change in price results in a relatively small change in quantity demanded. At lower prices, the absolute value of price elasticity is higher (elastic demand) because a change in price results in a relatively large change in quantity demanded. Therefore, as price decreases, the absolute value of price elasticity of demand increases (i.e., demand becomes more elastic), which means that choice C is the correct answer.

Question 2

If the demand for cell phone service is inelastic,then
A)the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).
B)the percentage change in quantity demanded is equal to the percentage change in price.
C)the quantity demanded does not change in response to changes in price.
D)the percentage change in quantity demanded is less than the percentage change in price (in absolute value).

Accepted Answer

D

Question 3

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve
A)when demand is elastic.
B)in special cases when the percentage change in the quantity demanded is equal to the percentage change in price.
C)to ensure that the elasticity has a negative value.
D)to ensure that we have only one value of the price elasticity of demand between two points on a demand curve.

Accepted Answer

D

Question 4

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is
A)horizontal.
B)downward sloping.
C)curvilinear.
D)vertical.

Accepted Answer

A price elasticity of demand equal to zero means that there is no change in quantity demanded in response to a change in price. In other words, demand is completely unresponsive to price changes. This would result in a vertical demand curve, where any increase or decrease in price would have no effect on the quantity of insulin demanded.

Question 5

The price elasticity of demand is equal to
A)the value of the slope of the demand curve.
B)the change in quantity demanded divided by the change in price.
C)the percentage change in price divided by the percentage change in quantity demanded.
D)the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

The answer of The price elasticity of demand is equal...

Question 6

In May 2011,the average price of gasoline in the United States was $3.76 per gallon,and consumers purchased nearly 5 percent less gasoline than they had during May 2010,when the average price of gasoline was $2.79 per gallon.Based on these figures,from May 2010 to May 2011,the demand for gasoline was
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly elastic.

Accepted Answer

The demand for gasoline is inelastic because the percentage decrease in quantity demanded (5%) is less than the percentage increase in price (approximately 34.8%). Inelastic demand indicates that consumers are not very responsive to price changes.

Question 7

If the slope of a demand curve is equal to -0.1 then
A)demand is inelastic.
B)we don't know whether the demand is elastic or inelastic.
C)the demand is elastic at low prices and inelastic at high prices.
D)as price increases by 10 percent quantity demanded decreases by 1 percent.

Accepted Answer

The answer of If the slope of a demand curve...

Question 8

Economists use the concept of ________ to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price.
A)slope
B)efficiency
C)relativity
D)elasticity

Accepted Answer

Economists use the concept of elasticity to measure how one economic variable responds to a change in another economic variable. Elasticity measures the responsiveness of quantity demanded or quantity supplied to a change in price, income, or other factors that affect its value. This concept is commonly used in economics to analyze the impact of various policy measures on consumer behavior, business decisions, and market outcomes.

Question 9

Carrie Bradshaw claims that when it comes to buying shoes,"price is no object." If this is true,then her demand for shoes is
A)perfectly elastic.
B)perfectly inelastic.
C)unit-elastic.
D)horizontal.

Accepted Answer

If price is truly no object for Carrie Bradshaw, then her demand for shoes is not affected by changes in price. This means that her demand is perfectly inelastic, as the quantity she wants to buy remains constant regardless of the price.

Question 10

To calculate the price elasticity of demand we divide
A)the percentage change in quantity demanded by the percentage change in price.
B)the percentage change in price by the percentage change in quantity demanded.
C)rise by the run.
D)the average price by the average quantity demanded.

Accepted Answer

Price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

Question 11

The slope of a demand curve is not used to measure the price elasticity of demand because
A)the slope of a linear demand curve is not constant.
B)the slope of a line cannot have a negative value.
C)the measurement of slope is sensitive to the units chosen for price and quantity.
D)the slope of the demand curve does not tell us how much quantity changes as price changes.

Accepted Answer

The measurement of slope is sensitive to the units chosen for price and quantity, meaning that a change in the units used could dramatically alter the slope and therefore distort any calculation of price elasticity of demand. Therefore, other methods such as calculating the percentage change in quantity demanded in response to a percentage change in price are used to measure price elasticity of demand.

Question 12

Figure 6-1 
-Refer to Figure 6-1.The section of the demand curve labeled "A" represents
A)the inelastic section of the demand curve.
B)the unit-elastic section of the demand curve.
C)the elastic section of the demand curve.
D)the perfectly elastic section of the demand curve.

Accepted Answer

The section labeled "A" on a demand curve typically represents the elastic section, where a change in price leads to a relatively larger change in quantity demanded.

Question 13

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef,holding every thing else constant,will cause the quantity of beef demanded to
A)decrease by 12 percent.
B)decrease by 26 percent.
C)decrease by 32 percent.
D)decrease by 60 percent.

Accepted Answer

A price elasticity of demand of 0.60 (in absolute value) means that the percentage change in quantity demanded is 60% of the percentage change in price. Therefore, a 20% increase in the price of beef would lead to a 12% decrease in the quantity of beef demanded (0.60 x 20% = 12%).

Question 14

If the demand for iPods is price elastic,then
A)the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).
B)the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
C)the percentage change in quantity demanded is equal to the percentage change in price.
D)quantity demanded is not responsive to changes in price.

Accepted Answer

If the demand for a good is price elastic, it means that the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). This indicates that consumers are very responsive to changes in the price of the good, and small price changes lead to larger changes in quantity demanded.

Question 15

When the price of tortilla chips rose by 10 percent,the quantity of tortilla chips sold fell 4 percent.This indicates that the demand for tortilla chips is
A)inelastic.
B)elastic.
C)unit-elastic.
D)perfectly inelastic.

Accepted Answer

The answer of When the price of tortilla chips rose...

Question 16

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is
A)relatively,but not perfectly,elastic.
B)unit-elastic.
C)completely inelastic.
D)relatively,but not perfectly,inelastic.

Accepted Answer

The answer of When the price of pistachio nuts is...

Question 17

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is
A)infinity.
B)zero.
C)more than one.
D)equal to the absolute value of the slope of the demand curve.

Accepted Answer

If demand is perfectly elastic, a very small change in price will cause an infinite change in quantity demanded, thus making the elasticity coefficient equal to infinity.

Question 18

Figure 6-2 -Refer to Figure 6-2.As price falls from P_A to P_B,the quantity demanded increases most along D₁; therefore, A)D₁ is unit elastic. B)D₁ is more inelastic than D₂ or D₃. C)D₁ is more elastic than D₂ or D₃ D)D₁ is elastic at P_A but inelastic at P_B.

Accepted Answer

When the quantity demanded increases significantly in response to a small decrease in price, it indicates that the demand is relatively elastic. Therefore, as the quantity demanded increases most along D₁, it can be inferred that D₁ is more elastic than D₂ or D₃. Hence, the correct choice is C.

Question 19

If the demand for a steak is unit-elastic,then
A)the percentage change in quantity demanded is 1 percent greater than the percentage change in price.
B)the percentage change in quantity demanded is equal to the percentage change in price.
C)the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value).
D)quantity demanded does not respond to changes in price.

Accepted Answer

When demand is unit-elastic, the percentage change in quantity demanded is equal to the percentage change in price. This means that if the price of steak increases by 10%, then the quantity demanded will decrease by 10%. Similarly, if the price of steak decreases by 5%, then the quantity demanded will increase by 5%. Therefore, the answer is B.

Question 20

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then
A)aspirin is a normal good.
B)the demand for aspirin is inelastic.
C)aspirin has few substitutes.
D)the demand for aspirin is elastic.

Accepted Answer

The answer of If the absolute value of the price...

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

A linear downward sloping demand curve has price elasticities (in absolute values) that

If the demand for cell phone service is inelastic,then

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

The price elasticity of demand is equal to

If the slope of a demand curve is equal to -0.1 then

Economists use the concept of ________ to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price.

Carrie Bradshaw claims that when it comes to buying shoes,"price is no object." If this is true,then her demand for shoes is

To calculate the price elasticity of demand we divide

The slope of a demand curve is not used to measure the price elasticity of demand because

Figure 6-1 -Refer to Figure 6-1.The section of the demand curve labeled "A" represents

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value) .This means that a 20 percent increase in the price of beef,holding every thing else constant,will cause the quantity of beef demanded to

If the demand for iPods is price elastic,then

When the price of tortilla chips rose by 10 percent,the quantity of tortilla chips sold fell 4 percent.This indicates that the demand for tortilla chips is

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is

Figure 6-2 -Refer to Figure 6-2.As price falls from P_A to P_B,the quantity demanded increases most along D₁; therefore,

If the demand for a steak is unit-elastic,then

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then