Question 1

Assume that when the price of rockmelons is $2.50,the demand for rockmelons is unit-elastic,and that the demand curve for rockmelons is linear and downward sloping.If firms lower the price of rockmelons to $2.00,which of the following statements can be made regarding the price elasticity of demand for rockmelons?
A) The demand for rockmelons at $2.00 must be inelastic.
B) We cannot determine whether the demand for rockmelons is elastic or inelastic without knowing what the quantity demanded is at each price.
C) The demand for rockmelons at $2.00 must be elastic.
D) The demand for rockmelons at $2.00 must be unit-elastic.

Accepted Answer

The answer of Assume that when the price of rockmelons...

Question 2

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Accepted Answer

The demand for petrol is not perfectly inelastic because there are some alternatives to driving a car, such as public transportation or walking/biking. However, the demand for petrol is relatively inelastic because even if the price of petrol increases, many people will continue to purchase it because they need it for transportation purposes.

Question 3

Briefly explain the economic concept of elasticity.

Accepted Answer

The answer of Briefly explain the economic concept of elasticity....

Question 4

If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

Accepted Answer

The absolute value of the price elasticity of demand in this case should be calculated as (percentage change in quantity demanded) / (percentage change in price).

Substituting the given values, we get:

Price elasticity of demand = 7% / 35%

Price elasticity of demand = 0.2

Therefore, the absolute value of the price elasticity of demand is 0.2, which is not equal to 5. Hence, the statement is false.

Question 5

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Accepted Answer

The answer of Suppose at a price of $50,Yoshi's Jazz...

Question 6

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?
A) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock.
B) The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock.
C) The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock.
D) The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.

Accepted Answer

The slope of a linear demand curve is constant, but the price elasticity of demand varies along the curve. At higher prices, the demand for sunblock is likely to be more elastic because consumers have more substitute products to choose from. At lower prices, demand is likely to be more inelastic because there are fewer substitute products available. Therefore, the price elasticity of demand is not constant at all points along the demand curve.

Question 7

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

Accepted Answer

A unit-elastic demand means that the percentage change in quantity demanded is equal to the percentage change in price. For example, if the price of a steak increases by 10%, and as a result, the quantity demanded decreases by 10%, then the demand is unit-elastic.

Question 8

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 demand for iPods is price elastic, then a small change in price will result in a relatively larger change in the quantity demanded. This means that the percentage change in quantity demanded is greater than the percentage change in price (in absolute value), making option A the correct choice.

Question 9

If the demand for mobile 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

When demand is inelastic, it means that consumers are not very responsive to price changes. Therefore, the percentage change in quantity demanded is less than the percentage change in price (in absolute value). This is because consumers will continue to buy the product even if the price increases, or they will not significantly increase their consumption if the price decreases.

Question 10

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Accepted Answer

If demand is inelastic, the absolute value of the price elasticity coefficient is less than one.

Question 11

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50,the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula,what is the price elasticity of demand (in absolute value)over this range?
A) 0.003
B) 0.41
C) 2.43
D) 4

Accepted Answer

Using the midpoint formula, the price elasticity of demand can be calculated as:

(ΔQ/Q) / (ΔP/P) = ((600-800)/700) / ((4.50-4)/4.25) = (-0.286) / (0.0556) = -5.154

Taking the absolute value of this, we get:

| -5.154 | = 5.154

Therefore, the price elasticity of demand (in absolute value) over this range is 5.154, which is closest to option C (2.43).

Question 12

A perfectly elastic demand curve is
A) vertical.
B) horizontal.
C) curvilinear.
D) upward sloping.

Accepted Answer

A perfectly elastic demand curve is horizontal, meaning that no matter the price, consumers will demand the same amount of a product.

Question 13

Table 4-1
 
-Refer to Table 4-1.Suppose you own a bookstore.You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35.You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day.Compute the price elasticity of demand using the midpoint formula and these data.Select the correct implication from your work.
A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.
B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered.
C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered.
D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered.

Accepted Answer

The answer of Table 4-1
 
-Refer to Table 4-1.Suppose you...

Question 14

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

The answer of The midpoint formula is used to measure...

Question 15

If,at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold,then,using the midpoint formula,the demand for this good is inelastic.

Accepted Answer

Using the midpoint formula,
% change in quantity demanded = ((6-5)/((6+5)/2)) x 100% = 9.09%
% change in price = ((8-10)/((8+10)/2)) x 100% = -16.67%

The coefficient of price elasticity of demand is:
|9.09% / -16.67%| = 0.545

Since the absolute value of the coefficient is less than 1, the demand is inelastic. Therefore, the statement is true.

Question 16

If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

Accepted Answer

This is the definition of elastic demand. When the demand for a product is elastic, a small change in price causes a larger change in the quantity demanded. On the other hand, if the demand is inelastic, changes in price have a lesser impact on the quantity demanded.

Question 17

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then
A) the price elasticity of demand for teapots is greater than 1 in absolute value.
B) the demand for teapots is unit-elastic.
C) the price elasticity of demand for teapots is equal to zero.
D) the price elasticity of demand for teapots is less than 1 in absolute value.

Accepted Answer

A percentage change in quantity demanded that is greater than the percentage change in price indicates a higher responsiveness of demand to changes in price, which means that the price elasticity of demand is greater than 1 in absolute value.

Question 18

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Accepted Answer

If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.

Question 19

Figure 4-5 -Refer to Figure 4-5.As price falls from PA to PB,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 PA but inelastic at PB.

Accepted Answer

The quantity demanded increases more along D₁ as the price falls from PA to PB, indicating that this segment is more responsive to price changes and thus more elastic. Therefore, option C is the best choice. Option A is incorrect because unit elastic demand occurs when the percentage change in quantity demanded is equal to the percentage change in price. Option B is incorrect because there is no information in the graph to suggest that D₁ is less inelastic than the other segments. Option D is incorrect because the elasticity of demand is only defined at a specific point on the demand curve, rather than a range of prices.

Question 20

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because
A) there has never been evidence of a perfectly inelastic demand curve.
B) an inelastic demand curve may be perfectly inelastic at some times but not others.
C) perfectly inelastic demand curves are rare.
D) an inelastic demand curve may be elastic at high prices.

Accepted Answer

Perfectly inelastic demand curves are rare and generally not seen in real-world markets. It is possible for an inelastic demand curve to become more elastic at high prices, but this does not guarantee that it will become perfectly elastic. Therefore, assuming that an inelastic demand curve is perfectly inelastic would be an incorrect assumption.

Quiz 4: Market Efficiency and Market Failure

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Briefly explain the economic concept of elasticity.

If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

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

If the demand for iPods is price elastic,then

If the demand for mobile phone service is inelastic,then

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50,the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula,what is the price elasticity of demand (in absolute value) over this range?

A perfectly elastic demand curve is

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

If,at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold,then,using the midpoint formula,the demand for this good is inelastic.

If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Figure 4-5 -Refer to Figure 4-5.As price falls from PA to PB,the quantity demanded increases most along D₁; therefore,

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

Quiz 4: Market Efficiency and Market Failure

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Briefly explain the economic concept of elasticity.

If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

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

If the demand for iPods is price elastic,then

If the demand for mobile phone service is inelastic,then

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50,the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula,what is the price elasticity of demand (in absolute value) over this range?

A perfectly elastic demand curve is

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

If,at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold,then,using the midpoint formula,the demand for this good is inelastic.

If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Figure 4-5 -Refer to Figure 4-5.As price falls from PA to PB,the quantity demanded increases most along D1; therefore,

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

Figure 4-5 -Refer to Figure 4-5.As price falls from PA to PB,the quantity demanded increases most along D₁; therefore,