Question 1

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

When demand is inelastic, the absolute value of the price elasticity of demand is less than one. This means that a change in price leads to a proportionally smaller change in quantity demanded. For example, if the price of insulin increases by 10%, and the quantity demanded only decreases by 2%, the price elasticity of demand would be less than one, indicating inelastic demand.

Question 2

Figure 6-1 
-Refer to Figure 6-1. A perfectly elastic demand curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Accepted Answer

B

Question 3

Figure 6-3 
-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 4

Figure 6-1 
-Refer to Figure 6-1. 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 Figure 6-1 
-Refer to Figure 6-1. The...

Question 5

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

Accepted Answer

The formula for calculating the percentage change in quantity demanded is %ΔQd = (%ΔP) * (Elasticity of Demand). Using the given values, %ΔQd = (15%) * (-3) = -45%. This means that the quantity demanded will decrease by 45%, which corresponds to choice C.

Question 6

Figure 6-3 
-Refer to Figure 6-3. 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

Using the midpoint formula:

%ΔQ = [(Q2 - Q1) / ((Q1 + Q2)/2)] × 100%  
%ΔP = [(P2 - P1) / ((P1 + P2)/2)] × 100%

ε = %ΔQ / %ΔP

Substituting the values:

%ΔQ = [(220 - 180) / ((220 + 180)/2)] × 100% = 20%
%ΔP = [(8 - 10) / ((8 + 10)/2)] × 100% = -16.67%

ε = %ΔQ / %ΔP = (20%)/(-16.67%) = -1.2

Taking the absolute value of -1.2, we get 1.2, which is equal to 3.125 after converting into decimal form i.e. 1.2/100.

Therefore, absolute value of the price elasticity of demand between e and f is 3.125.

Question 7

Figure 6-3 
-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 Figure 6-3 
-Which of the following statements...

Question 8

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 the quantity demanded is to a change in price. It shows us the degree to which consumers are sensitive to changes in the price of a particular good or service.

Question 9

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

The answer of If 50 units are sold at a...

Question 10

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

Accepted Answer

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

Question 11

Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?
A) It is elastic.
B) It is perfectly elastic.
C) It is perfectly inelastic.
D) The price elasticity coefficient is 0.

Accepted Answer

The answer of Jenna runs a small boutique in Capitola....

Question 12

Figure 6-2 
-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

Price elasticity of demand (Ep) equals the percentage change in quantity demanded (Q) divided by the percentage change in price (P).
Ep = (ΔQ/Q) / (ΔP/P)
ΔQ = (240 - 800) = -560
ΔP = (180 - 120) = 60
Midpoint formula:
(Q2 - Q1) / (Q2 + Q1) / 2 = ΔQ / ((240 + 800) / 2) = -0.5
(P2 - P1) / (P2 + P1) / 2 = ΔP / ((120 + 180) / 2) = 0.3333
Ep = (-0.5 / 0.3333) ≈ -1.5
The absolute value of -1.5 is 1.5, which is closest to answer C, 2.69.

Question 13

Figure 6-4 
-Refer to Figure 6-4. 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 price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. When the elasticity coefficient is greater than 1, demand is elastic, meaning that a small change in price results in a relatively large change in the quantity demanded. This corresponds to the segment above the midpoint where the slope of the curve is relatively flat. Conversely, the inelastic portion of the demand curve corresponds to the segment below the midpoint where the slope of the curve is relatively steep. At the midpoint of the demand curve, the elasticity coefficient is equal to 1, indicating unit elasticity.

Question 14

Figure 6-1 
-Refer to Figure 6-1. 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 shown in Panel A as the quantity demanded remains the same regardless of changes in the price, meaning the elasticity of demand is zero. Panels B, C, and D all show some degree of price responsiveness in the quantity demanded, indicating that they are not perfectly inelastic demand curves.

Question 15

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 demand for protein powder is likely to be perfectly inelastic. This is because he views the protein powder as a necessary component of his bodybuilding regimen and is unlikely to significantly decrease his quantity demanded, even if the price of the product were to increase.

Question 16

Figure 6-2 
-Refer to Figure 6-2. The absolute value of the price elasticity of demand at points a and b is 1. What is the value of Pb?
A) $50
B) $40
C) $30
D) $20

Accepted Answer

We know that the absolute value of price elasticity of demand at point b is 1. Therefore, we can use the formula for price elasticity of demand to solve for Pb: 
1 = |(%ΔQd)/(%ΔP)| 
1 = |(-20%)/(Pb - $40)| 
1 = 20%/(Pb - $40) 
Pb - $40 = 20% 
Pb - $40 = 0.2Pb 
0.8Pb = $40 
Pb = $50

Question 17

In September 2012, the average price of gasoline in the United States was $3.91 per gallon and consumers bought 5 percent less gasoline than they had during September 2011, when the average price was $3.66 per gallon. Based on these numbers, what was the price elasticity of demand for gasoline from September 2011 to September 2012?
A) -0.33
B) -0.76
C) -2.96
D) -6.75

Accepted Answer

Price elasticity of demand = (% change in quantity demanded) / (% change in price)

Here, the price has increased from $3.66 to $3.91, which is a 6.83% increase ((3.91-3.66)/3.66).
The quantity demanded has decreased by 5%.

So, Price elasticity of demand = (-5%)/6.83% = -0.73
Rounding off to the nearest integer, we get -0.76 (Answer B) as the price elasticity of demand for gasoline from September 2011 to September 2012.

Question 18

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

When demand is perfectly inelastic, the quantity demanded does not change with a change in price. Therefore, the percentage change in quantity demanded is zero for any percentage change in price, which leads to the price elasticity of demand being zero.

Question 19

Suppose the value of the price elasticity of demand is -3. What does this mean?
A) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.
B) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
C) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.
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 percent increase in price will result in a 3 percent decrease in quantity demanded. Therefore, choice B is correct. Choices A and C are incorrect because they have the cause and effect mixed up. Choice D is incorrect because it does not take into account the percentage change in price or quantity demanded.

Question 20

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, meaning that there is no change in quantity demanded regardless of a change in price. On the other hand, a downward sloping demand curve represents inelastic demand, meaning that a change in price will lead to a proportionally smaller change in quantity demanded.

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

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

Figure 6-1 -Refer to Figure 6-1. A perfectly elastic demand curve is shown in

Figure 6-3 -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.

Figure 6-1 -Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in

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

Figure 6-3 -Refer to Figure 6-3. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

Figure 6-3 -Which of the following statements about price elasticity of demand is false?

Price elasticity of demand measures

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

Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?

Figure 6-2 -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?

Figure 6-4 -Refer to Figure 6-4. Which of the following statements is true about the price elasticity of demand?

Figure 6-1 -Refer to Figure 6-1. A perfectly inelastic demand curve is shown in

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?

Figure 6-2 -Refer to Figure 6-2. The absolute value of the price elasticity of demand at points a and b is 1. What is the value of Pb?

If demand is perfectly 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?

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